ACQUISITION AGREEMENT





	






ACQUISITION AGREEMENT 



by and among 



A.R. SCHMEIDLER &
CO., INC. 



ARNOLD R. SCHMEIDLER 



and 



ALBERT J. SCHMEIDLER 



as Sellers 



and 



HUDSON VALLEY HOLDING CORP. 



and 



HUDSON VALLEY BANK 



as Buyer 



June 29, 2004 

















	






TABLE OF CONTENTS 












	SECTION 1.	DEFINITION	1
	SECTION 2.	PURCHASE	8


	2.1	Purchase and Sale	8
	2.2	Consideration	8
	2.3	Adjustment of Initial Payment; Estimate	12
	2.4	Closing Statement; Final Adjustment of Initial Payment	13
	2.5	Closing	14
	2.6	Deliveries at the Closing	14


	SECTION 3	REPRESENTATIONS AND WARRANTIES REGARDING SELLERS AND THE COMPANY	15


	3.1	Organization and Good Standing of the Company	15
	3.2	Subsidiaries	15
	3.3	Capitalization; Title to Shares	15
	3.4	Authority, Approvals and Consents	14
	3.5	Financial Statements	16
	3.6	Absence of Change	16
	3.7	Taxes	16
	3.8	Property	19
	3.9	Contracts	20
	3.10	Company Reports	20
	3.11	Litigation; Regulatory Action	21
	3.12	ERISA and Employees	22
	3.13	Compliance with Laws	23
	3.14	Representations and Warranties Regarding the Investment
Advisory Business	23
	3.15	Investment Intent of Sellers	26
	3.16	Derivatives	26
	3.17	Intellectual Property Rights	26
	3.18	Brokers	27
	3.19	Environmental Matters	27
	3.20	Insurance	27
	3.21	Labor Relations	28
	3.22	Advertising	28
	3.23	Anti-Money Laundering	28
	3.24	Bank Accounts	28
	3.25	No Material Misstatements or Omissions	28


	SECTION 4	REPRESENTATIONS AND WARRANTIES REGARDING BUYER	28


	4.1	Organization and Good Standing of Hudson Valley and Buyer	28
	4.2	Power; Authorization; Consents	28
	4.3	SEC Filings; Financial Statements	29
	4.4	Brokers	30
	4.5	Investment Intent of Buyer	30
	4.6	No Material Misstatements or Omissions	30


	SECTION 5	COVENANTS	30


	5.1	Advisory Contracts Consents, Broker-Dealer Change in Control and Banking Approvals	30
	5.2	Compliance With Securities Law	31
	5.3	Tax Matters	31
	5.4	Access	34
	5.5	Announcements	34
	5.6	Consents, Cooperation	34
	5.7	Notification of Certain Matters	35
	5.8	Further Assurances	35
	5.9	Retention of Books and Records	35
	5.10	Stock Options	35
	5.11	Conduct of Business Prior to the Closing	35
	5.12	Non-competition; Non-solicitation	37
	5.13	Right of First Refusal; Registration	39
	5.14	Employment of the Company's Employees	41
	5.15	Post-Closing Governance Matters	42
	5.16	Buyer Referrals	43
	5.17	Hudson Valley Guarantee	43


	SECTION 6	CONDITIONS TO THE OBLIGATIONS OF BUYER	43


	6.1	Representations and Warranties; Covenants	43
	6.2	Opinion of Sellers' Counsel	43
	6.3	Arnold R. Schmeidler Employment Agreement	44
	6.4	Regulatory Approvals	44
	6.5	Absence of Litigation	44
	6.6	Consents	44
	6.7	Investment Contracts	44
	6.8	Investment Adviser Registration	45
	6.9	Key Man Life Insurance	45
	6.10	Net Capital	45
	6.11	Sellers' Fees	45
	6.12	By-Laws	45
	6.13	Certificates	45


	SECTION 7	CONDITIONS TO THE OBLIGATIONS OF THE SELLERS	45


	7.1	Representations and Warranties; Covenants	45
	7.2	Opinion of Buyer's Counsel	46
	7.3	Schmeidler Employment Agreement	46
	7.4	Regulatory Approvals	46
	7.5	Absence of Litigation	46
	7.6	Investment Contracts	46
	7.7	Certificates	46


	SECTION 8	TERMINATION	46


	8.1	Termination	46
	8.2	Effect of Termination	47


	SECTION 9	SURVIVAL AND INDEMNIFICATION	47


	9.1	Survival	47
	9.2	Seller's Indemnification	47
	9.3	Buyer's Indemnification	48
	9.4	Claims by Third Parties	49
	9.5	Buyer's Right to Set-Off	50


	SECTION 10	MISCELLANEOUS	50


	10.1	Headings	50
	10.2	Stockholders' Representative	50
	10.3	Authority	50
	10.4	Limitation on Liability	50
	10.5	Notices	51
	10.6	Assignment	52
	10.7	Entire Agreement	52
	10.8	Amendment; Waiver	52
	10.9	Counterparts	52
	10.10	Governing Law	52
	10.11	Expenses	53
	10.12	Severability	53
	10.13	Consent to Jurisdiction	53
	10.14	Third Person Beneficiaries	53
	10.15	Representations and Warranties: Disclosure Schedule	53
	10.16	United States Dollars	53
	10.17	No Agreement until Signed by all Parties	53









	




ACQUISITION AGREEMENT 



        THIS
AGREEMENT dated this 29th day of June, 2004, is by and among Arnold R.
Schmeidler and Albert J. Schmeidler (each a “Seller”, and collectively,
the “Sellers”), A.R. Schmeidler & Co., Inc., a New York corporation
(the “Company”), Hudson Valley Bank, a New York state-chartered bank
(“Buyer”), and Hudson Valley Holding Corp., a New York corporation and
registered bank holding company of Buyer (“Hudson Valley”). 



        WHEREAS,
Buyer desires to purchase and Sellers desire to sell all issued and outstanding shares of
capital stock of the Company, on the terms and conditions hereinafter set forth. 



        NOW,
THEREFORE, in consideration of the premises and of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 



SECTION 1.   DEFINITIONS 



        In
this Agreement (including the recitals), except as expressly provided or as the context
otherwise requires: 



        “Affiliate”
means, with respect to any Person, any other Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, such Person. A Person will
be deemed to control a corporation if such Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of such corporation,
whether through the ownership of voting securities, by contract or otherwise. 



        “Agreement”
means this agreement including all recitals, exhibits and the Disclosure Schedule relating
hereto. 



        “Arbiter”
means KPMG LLP, or such other firm of certified public accountants as may be selected by
the agreement of the Buyer and the Stockholders’ Representative. 



        “Business
Day” means any day which is not a Saturday, Sunday or any other day on
which banks in the State of New York are authorized or required by law to close. 



      “Change
in Control of Hudson Valley” means













	(a)	 	the
acquisition by any individual,  entity, or group,  within the meaning of Section
     13(d)(3) or 14(d)(2) of the  Exchange Act (any such  individual,  entity or
     group   being    referred    to   herein   as   an    “Acquiring
     Person”),  of beneficial  ownership (within the meaning
     of Rule 13d-3  promulgated under the Exchange Act) of 50% or more of either
     (i) the then  outstanding  shares of common  stock of  Hudson  Valley  (the
     “Outstanding  Hudson Valley  Stock”) or (ii)
     the combined  voting power of the then  outstanding  voting  securities  of
     Hudson Valley  entitled to vote generally in the election of directors (the
     “Outstanding            Hudson           Valley           Voting
     Securities”);  provided,  however, that for purposes of
     this subsection  (a), the following  acquisitions of stock shall not result
     in a Change in Control:  (i) any  acquisition  directly from Hudson Valley,
     (ii) any  acquisition  by  Hudson  Valley,  (iii)  any  acquisition  by any
     employee  benefit plan (or related trust) sponsored or maintained by Hudson
     Valley  or any  corporation  controlled  by  Hudson  Valley,  or  (iv)  any
     acquisition by any corporation pursuant to a transaction that complies with
     clauses (i), (ii), and (iii) of paragraph (c) below; or 















	(b)	 	individuals
who, as of the date  hereof,  constitute  the Board  (the  “Incumbent
     Board”)  cease for any reason to  constitute at least a
     majority of the Board;  provided,  however,  that any individual becoming a
     director  subsequent to the date hereof whose  election,  or nomination for
     election, by Hudson Valley’s shareholders was approved by a vote of at
     least a majority of the directors then comprising the Incumbent Board shall
     be  considered  as though such  individual  were a member of the  Incumbent
     Board, but excluding,  for this purpose,  any such individual whose initial
     assumption of office occurs as a result of an actual or threatened election
     contest  with  respect to the  election  or removal of  directors  or other
     actual or threatened solicitation of proxies or consents by or on behalf of
     a Person other than the Board; or 






	(c)	 	consummation
of   a reorganization,  merger, or consolidation or sale or other disposition of
     all  or   substantially   all  of  the   assets   of   Hudson   Valley   (a
     “Business   Combination”),   in  each  case,
     unless following such Business Combination, (i) all or substantially all of
     the individuals and entities who were the beneficial owners,  respectively,
     of the Outstanding Hudson Valley Common Stock and Outstanding Hudson Valley
     Voting   Securities   immediately   prior  to  such  Business   Combination
     beneficially own, directly or indirectly,  more than 50% of,  respectively,
     the outstanding shares of common stock and the combined voting power of the
     then  outstanding  voting  securities  entitled  to vote  generally  in the
     election of  directors,  as the case may be, of the  corporation  resulting
     from  such  Business   Combination,   including,   without  limitation,   a
     corporation  that as a result of such transaction owns Hudson Valley or all
     or  substantially  all of Hudson  Valley’s  assets either  directly or
     through one or more  subsidiaries  (any such corporation  being referred to
     herein  as a  “Resulting  Corporation”),  in
     substantially  the same  proportions as their  ownership of the Outstanding
     Hudson Valley Common Stock and Outstanding Hudson Valley Voting Securities,
     as the case may be, immediately prior to such Business Combination, (ii) no
     Acquiring Person (excluding any employee benefit plan (or related trust) of
     Hudson Valley or a Resulting  Corporation)  beneficially owns,  directly or
     indirectly, 50% or more of, respectively,  the outstanding shares of common
     stock of the Resulting Corporation or the combined voting power of the then
     outstanding voting securities of such Resulting Corporation,  except to the
     extent that such ownership existed prior to the Business  Combination,  and
     (iii) at least a majority of the members of the board of  directors  of the
     Resulting  Corporation  were members of the Incumbent  Board at the time of
     the  execution  of the  initial  agreement,  or of the action of the Board,
     providing for such Business Combination; or 





	



2 



















	(d)	 	approval by the  shareholders of Hudson Valley of a complete
     liquidation or dissolution of Hudson Valley; or 






	(e)	 	both  William  Griffin  (Chairman) and James Landy (Chief  Executive
     Officer) are replaced in their  respective  current roles as both directors
     of Hudson Valley and Chairman and Chief  Executive  Officer,  respectively,
     for reasons other than death, disability or retirement. 






	




        “Change
in Control of the Company” means 












	(a)	 	the
acquisition by an Acquiring Person of beneficial  ownership  (within the meaning
     of Rule 13d-3  promulgated under the Exchange Act) of 50% or more of either
     (i) the  then  outstanding  shares  of  common  stock of the  Company  (the
     “Outstanding  Company  Stock”)  or (ii)  the
     combined  voting power of the then  outstanding  voting  securities  of the
     Company  entitled  to vote  generally  in the  election of  directors  (the
     “Outstanding  Company  Voting  Securities”);
     provided,  however, that for purposes of this subsection (a), the following
     acquisitions  of stock  shall not  result in a Change in  Control:  (i) any
     acquisition by any employee  benefit plan (or related  trust)  sponsored or
     maintained by Hudson Valley or any corporation controlled by Hudson Valley,
     or (ii) any acquisition by any corporation  pursuant to a transaction  that
     complies with clauses (i) and (ii) of paragraph (b) below; or 






	(b)	 	consummation
of   a reorganization,  merger, or consolidation or sale or other disposition of
     all  or   substantially   all   of   the   assets   of   the   Company   (a
     “Company  Business  Combination”),  in  each  case,
     unless  following  such Company  Business  Combination,  (i) Hudson  Valley
     beneficially owns, directly or indirectly,  more than 50% of, respectively,
     the outstanding shares of common stock and the combined voting power of the
     then  outstanding  voting  securities  entitled  to vote  generally  in the
     election of  directors,  as the case may be, of the  corporation  resulting
     from such Company Business Combination,  including,  without limitation,  a
     corporation that as a result of such transaction owns the Company or all or
     substantially all of the  Company’s  assets either directly or through
     one or more  subsidiaries (any such corporation being referred to herein as
     a “Resulting Company”),  and (ii) at least a
     majority of the members of the board of directors of the Resulting  Company
     were  members of the board of  directors  of the Company at the time of the
     execution  of the  initial  agreement,  or of  the  action  of  the  Board,
     providing for such Company Business Combination; or 






	(c)	 	approval
by the shareholders of the Company of a complete liquidation or dissolution of the Company. 






	




        
“Change in Control” means either a Change in Control of Hudson Valley or a Change in
Control of the Company. 



3 















	





        “Client
Run Rate Revenues” means as of any given date for a specific Client
the assets under management for such Client multiplied by the effective fee rate for such
Client as set forth in its Client Investment Contract or Contracts. 



        “Closing”
means the closing of the purchase and sale of the Shares pursuant to this Agreement. 



        “Closing
Date” means the date on which the Closing occurs as determined by
Section 2.5 of this Agreement. 



        “Code”
means the Internal Revenue Service Code of 1986, as amended. 



        “Common
Stock” means the common stock, par value $0.01 per share, of the
Company. 



        “Company
Agreement” means any mortgage, indenture, note, agreement, contract,
lease, license, franchise, obligation, instrument or other commitment, arrangement or
understanding of any kind (whether oral or in writing) to which the Company is a party or
by which the Company or any of its property may be bound or affected. 



        “Company
Intellectual Property Rights” means, collectively, all of the
Intellectual Property Rights used by the Company. 



        “Disclosure
Schedule” means the Company’s disclosure schedule relating to
this Agreement. Each reference to a “Schedule” means a particular portion of the
Disclosure Schedule. 



        “Environmental
Laws” means any applicable federal, state, local or other law,
statute, ordinance rule, regulation, environmental permit, judgment, order decree, license
or other binding requirement of, or binding agreement with, any Regulatory Agency, now or
hereafter in effect and, in each case, as amended from time to time, relating to or
governing the presence, Release, or threatened Release of hazardous material, the
protection of natural resources, health, safety or the environment, or the management,
manufacture, use, processing, sale, generation, handling, labeling, distribution,
transportation, treatment, storage, disposal, remediation, disclosure, or notice of the
presence, Release or threatened Release of hazardous material including, without
limitation, (a) the Clean Air Act, 42 U.S.C. §7401 et seq., as amended,
(b) the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
§9601 et seq., as amended, (c) the Emergency Planning and community
Right-to-Know Act, 42 U.S.C. §11001 et seq., as amended, (d) the
Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. §136 et
seq., (e) the Federal Water Pollution Control Act, 33 U.S.C. §1251 et
seq., as amended, (f) the Hazardous Material Transportation Act, 49 U.S.C.
§1801 et seq., as amended, (g) the Low-Level Radioactive Waste Policy
Act, 42 U.S.C. §2021b et seq., as amended, (h) the Occupational Safety
and Health Act, 29 U.S.C. §651 et seq., as amended, (i) the Resource
Conservation and Recovery Act, 42 U.S.C. §6901 et seq., as amended, (j)
the Safe Drinking Water Act, 42 U.S.C. §300f et seq., as amended, (k)
the Toxic Substance Control Act, 15 U.S.C. §2601 et seq., as amended,
and (l) the substantive equivalent of any of the foregoing in any state or foreign
jurisdiction. 



        “ERISA”
means the Employee Retirement Income Security Act of 1974, as amended. 



4 















	





        “Exchange
Act” means the Securities Exchange Act of 1934, as amended. 



        “GAAP”
shall mean accounting principles generally accepted in the United States of America. 



        “Governmental
Authority” means any United States federal, state or local or any
foreign government, governmental, regulatory or administrative authority, agency or
commission or any court, tribunal or judicial or arbitral body or instrumentality. 



        “Hudson
Valley Common Stock” means the common stock, par value $0.20 per share, of
Hudson Valley. 



        “Insider”
means, with respect to any Person, any officer, director or Affiliate of such Person. 



        “Investment
Advisers Act” means the Investment Advisers Act of 1940, as amended. 



        “Investment Contracts”
means the contracts between the Company and the Company’s clients relating to the
provision by the Company of investment advisory services. 



        “Investment
Company” means each investment company registered under the Investment
Company Act. 



        “Investment
Company Act” means the Investment Company Act of 1940, as amended. 



        “Intellectual
Property Rights” means all patents, patent applications, patent
rights, trademarks, trademark registrations, trademark applications, service marks,
service mark applications, business marks, trade names, brand names, all other names and
slogans embodying business goodwill, copyright registrations, copyright rights (including
those in computer programs, software, including all source code and object code,
development documentation, programming tools, drawings, specifications and data) trade
secrets and all other registered rights now existing and hereafter created, including
proprietary and confidential information, and any rights under licenses to any of the
foregoing, whether or not subject to statutory registration or protection. 



        “Knowledge
of the Company”, or words of similar import, means knowledge of
Arnold R. Schmeidler, Albert J. Schmeidler, and, with respect to each Client
account handled by John Wyman, John Wyman. 



        “Legal
Requirements” means all statutes, ordinances, codes, rules,
regulations, standards, judgments, decrees, writs, rulings, injunctions, orders and other
requirements of governmental, administrative or judicial entities that are applicable to
the Company and any of its property. 



        “Lien”
means any encumbrance, charge, right or other security interest. 



5 















	





        “Losses”
means, in respect of Buyer or Sellers, any and all damages, losses, liabilities, claims
and reasonable expenses of defense thereof (including, without limitation, fees and
disbursements of counsel), Liens or other obligations of any nature whatsoever. 



        “Material
Adverse Effect” means any material adverse change or effect to the
business, operations, assets, financial condition, properties or results of operations of
the Company. 



        “Material
Agreement” means each Company Agreement that is material to the
business, operations, assets or financial condition of the Company, including, without
regard to materiality, each of the following Company Agreements: 











	(a)	 	any
mortgage, indenture, note, installment obligation or other instrument,
agreement or arrangement for or relating to borrowing of money by the
Company; 






	(b)	 	any
guaranty,  direct or  indirect,  by the Company of any  obligation  for borrowed
     money, excluding endorsements made for collection in the ordinary course of
     business; 






	(c)	 	any
obligation to sell or to register the sale of any of the Shares or other
                    securities of the Company; 






	(d)	 	any
obligation to make payments, contingent or otherwise, arising out of the
                    prior acquisition of the business of other persons; 






	(e)	 	any
lease or similar arrangement for the use by the Company of personal property
                    involving payments in excess of $25,000 per annum; 






	(f)	 	any
Company Agreement to which any Insider is a party; 






	(g)	 	any
Company Agreement providing for aggregate payments in excess of $25,000 per
                    annum after the Closing that is not terminable by the Company on less
than 30                     days’ notice without penalty; 






	(h)	 	any
Company Agreement containing non-competition covenants binding on the
                    Company or any Insider of the Company; 






	(i)	 	any partnership, joint venture or similar agreement to which
     the Company is a party; and 






	(j)	 	any
employment contracts,  arrangements,  commitments or  understandings of any kind
     with any officer, director, employee or consultant of the Company which may
     not be  terminated  by the Company  without  penalty  upon not more than 30
     days’  notice,  pursuant to which  payments may be required to be made
     following the Closing. 






	




        “NASD”
means the National Association of Securities Dealers, Inc. 



6 















	





        “Person”
means and includes an individual, corporation, partnership (limited or general), joint
venture, association, trust, any other unincorporated organization or entity and a
governmental entity or any department or agency thereto. 



        “Quarter”
means each of the three-month quarters ending on March 31, June 30, September 30, and
December 31 during any calendar year. 



        “Release”
shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping, or disposing into the outdoor environment. 



        “Run
Rate Revenues” means as of any given date the sum of all Clients’ Run
Rate Revenues, excluding the Client Run Rate Revenues of each Client that has notified the
Company that it intends to terminate its Investment Contract with the Company. 



        “Run
Rate Revenues at Closing” means the Company’s Run Rate Revenues at the
close of business on the third Business Day immediately preceding the Closing Date. For
purposes of calculating Run Rate Revenues at Closing (i) the assets under management of a
Client that was also a Client on the date hereof shall be deemed to be equal to the assets
under management on the date hereof as specified on Schedule 1.1 plus any additions or
contributions minus any withdrawals since the date hereof, and (ii) the assets under
management of a Person who becomes a Client after the date hereof shall be deemed to be
equal to the initial amount of assets under management plus any additions or contributions
and minus any withdrawals since such Person became a new Client, it being the intention of
the parties that the assets under management shall not be adjusted for fluctuations in
market value. 



        “Run
Rate Revenues at Signing” means the Company’s Run Rate Revenues as of
the close of business on the second Business Day prior to the date hereof as set forth on
Schedule 1.1. 



        “SEC”
means the United States Securities and Exchange Commission. 



        “Securities
Act” means the Securities Act of 1933, as amended. 



        “Shares”
means all issued and outstanding shares of the Company’s Common Stock. 



        “Schmeidler
Employment Agreement” means the agreement to be entered into between
Arnold R. Schmeidler and the Company in substantially the form attached hereto as
Exhibit C. 



        “Side
Letter” means the letter dated as of the date hereof from Buyer to the
Company and the Sellers addressing the Company’s net capital requirements. 



        “Stockholders’
Equity” means the stockholders’ equity of the Company as of the
Closing Date prepared in accordance with GAAP on a basis consistent with the preparation
of the Company Financial Statements. Notwithstanding the foregoing, Stockholders’
Equity as of the Closing Date shall be determined after accruing (i) all of the expenses
incurred by the Sellers (and payable by the Company) or the Company in connection with the
sale of the Company, (ii) all Taxes incurred by the Company through the Closing Date
whether or not then payable, and (iii) all Taxes incurred in connection with the election
of the Company pursuant to Section 338(h)(10) of the Code. 



7 















	




        “Stockholders’
Representative” shall mean Arnold R. Schmeidler, who represents
all Stockholders and the Company pursuant to a limited power of attorney executed by
Albert J. Schmeidler, a copy of which is attached hereto as Exhibit A. 



        “Subsidiary”
means with respect to any Person (the “Owner”), any corporation or
other Person of which securities or other interests having the power to elect a majority
of that corporation’s or other Person’s board of directors or similar governing
body, or otherwise having the power to direct the business and policies of that
corporation or other Person (other than securities or other interests having such power
only upon the happening of a contingency that has not occurred), are held by the Owner or
one or more of its Subsidiaries. 



        “Tax”
or “Taxes” means all taxes, charges, fees, levies or other
assessments, and all estimated payments thereof, including but not limited to income,
excise, property, sales, use, value added, environmental, franchise, payroll, transfer,
gross receipts, withholding, social security, UBT and unemployment taxes, imposed by any
federal, state, county or local government, any subdivision or agency thereof, including,
but not limited to, the City of New York, and any interest, penalty and expense relating
to such taxes, charges, fees, levies or other assessments. 



        “Tax
Returns” means all federal, state and local Tax returns, reports and
declarations which are due and required to be filed by any applicable Tax law. 



SECTION 2.   PURCHASE 



             2.1.       
          Purchase and Sale.   Upon the terms and subject to the
          conditions set forth in this Agreement, Sellers agree to sell to Buyer, and
          Buyer agrees to purchase from Sellers, all of Sellers’ right, title and
          interest in and to the Shares. 



             2.2.       
          Consideration. 



             (a)       
          At the Closing Buyer will pay to the Sellers in accordance with Schedule 2.2(a)
          an aggregate amount equal to $7,764,000, subject to adjustment pursuant to
          Section 2.3 and Section 6.7(b) (the “Initial Payment”).
          Schedule 2.2(a) sets forth the number of shares and percentage ownership of the
          Common Stock of the Company by each Seller. 



             (b)       
          (i) Following the Closing, Buyer shall pay Sellers five (5) annual earn out
          payments (each, an “Earn Out” and in the aggregate, the
          “Earn Outs”). Earn Outs are payable with respect to each of the
          first five 12-month periods beginning on the first day of the calendar month
          immediately following the Closing (each, an “Earn-Out Year”)
          and are payable on the date (the “Payment Date”) which is not
          more than five (5) business days after the date of delivery of the certificate
          of the Buyer’s Chief Financial Officer as provided in Section 2.2(b)(vii)
          (the “Certificate Date”). Each Earn-Out Year’s
          “Earn Out” will equal in the aggregate 80% of the
          Company’s Pre-Tax Earnings (as hereinafter defined). The Earn Out will be
          paid to the Sellers by wire transfer of immediately available funds and in the
          same percentage to each Seller as the Initial Payment and, except as provided in
          Section 9.5, shall be paid to the Sellers without setoff and regardless of the
          death or disability of any Seller, and regardless of whether any or all of the
          Sellers remain employed with Buyer for such Earn-Out Year. Notwithstanding
          anything in this Agreement to the contrary, if any receivables of the Company,
          including all balance sheet amounts included under “Receivables from
          Brokers”, outstanding on the Closing Date remain outstanding ninety (90)
          days after the Closing, then the Earn Out for the first Earn-Out Year shall be
          reduced by such outstanding amount. 



8 















	





                  (ii)       
          After the end of the first Earn-Out Year when the sum of the Company’s
          Pre-Tax Earnings for that Earn-Out Year and all preceding Earn-Out Years is
          $9,100,000 or greater, but no sooner than the first day of the second Earn-Out
          Year unless an event described in Section 2.2(c)(i) occurs prior to that time,
          Buyer shall issue and deliver such number of shares of Hudson Valley Common
          Stock to the Sellers as set forth on Schedule 2.2(b)(ii). After the end of each
          subsequent Earn-Out Year through the fifth Earn-Out Year, Buyer shall issue and
          deliver such number of additional shares of Hudson Valley Common Stock to
          Sellers as set forth on Schedule 2.2(b)(ii), up to a maximum of 25,000 shares.
          If, following the determination of the Earn Out after the fifth Earn-Out Year,
          the aggregate Pre-Tax Earnings of the Company for all Earn-Out Years are less
          than $9,100,000, Buyer shall have no obligation whatsoever to deliver any shares
          of Hudson Valley Common Stock to the Sellers under this Section 2.2(b)(ii). For
          purposes of calculating Pre-Tax Earnings under this Section 2.2(b)(ii) for any
          Earn-Out Year, the parties shall use the definition of Pre-Tax Earnings
          contained in Section 2.2(b)(vi). Any shares of Hudson Valley Common Stock
          delivered to the Sellers pursuant to this Section 2.2(b)(ii) are hereinafter
          referred to as “Incentive Shares”. Hudson Valley shall issue
          all Incentive Shares to Sellers not later than sixty (60) days after the
          Certificate Date. 



                  (iii)       
          Unless previously issued pursuant to Section 2.2(c)(ii), if, as of the date
          which is two calendar years after the last day of the fifth Earn-Out Year,
          Arnold R. Schmeidler has not violated any terms of Section 5.12 hereof, Hudson
          Valley shall be obligated to deliver 5,000 shares (the “Competition
          Shares”) of Hudson Valley Common Stock to the Sellers. If Buyer becomes
          aware of an action that is a violation of Section 5.12 hereof and will be the
          basis for not delivering the Competition Shares, Buyer shall notify Arnold R.
          Schmeidler promptly after becoming aware of such action, and, to the extent the
          cure of such a violation is possible and effective, Arnold R. Schmeidler shall
          have fifteen (15) days to cure such violation. 



                  (iv)       
          The Incentive Shares and the Competition Shares (together, the
          “Additional Consideration Shares”) shall be issued by Hudson
          Valley to the Sellers in the same percentage to each Seller as the Initial
          Payment. Such shares shall not be registered under the Securities Act or under
          any state blue sky law and will be subject to restrictions thereunder, unless
          otherwise provided in this Agreement. Hudson Valley agrees that under existing
          Rule 144 of the SEC, such shares may be sold without restriction after two years
          from the Closing Date, so long as the Sellers are not affiliates of Hudson
          Valley. 



                  (v)       
          In the event of any change in the number of outstanding shares of Hudson Valley
          Common Stock by reason of any stock dividend or split, recapitalization, merger,
          consolidation, spin-off, reorganization, combination or exchange of shares, any
          distribution to shareholders other than a cash dividend, or other similar
          corporate change, the number of Additional Consideration Shares issuable to the
          Sellers hereunder shall be increased or decreased, as appropriate, in proportion
          to such increase or decrease in outstanding shares of Hudson Valley Common Stock
          and the Sellers shall be entitled to receive in connection with the issuance of
          any Additional Consideration Shares the distribution of dividends (other than
          cash) and any other securities issued in connection with a corporate change that
          they would have received had they been stockholders of Hudson Valley at the time
          of such dividend or change. Hudson Valley agrees to contribute to Buyer the
          Hudson Valley Common Stock to be paid hereunder. 



9 















	





                  (vi)       
          “Pre-Tax Earnings” means, with respect to the Company,
          “Income Before Provision for Income Taxes,” calculated in accordance
          with GAAP on a basis consistent with the preparation of the Company Financial
          Statements for periods prior to Closing. For the avoidance of doubt, Pre-Tax
          Earnings shall be determined after giving effect to, among other things, payment
          of salaries, Incentive Compensation and Additional Bonuses (as such terms are
          defined in Section 5.14(c)) of all employees of the Company, but shall exclude: 











	(A)	 	any
overhead allocations charged to the Company by Buyer or any of Buyer’s
                    Affiliates not agreed to by the Stockholders’ Representative; 






	(B)	 	any
purchase accounting adjustments necessitated by Buyer or Hudson Valley in
          connection with this Agreement; 






	(C)	 	the
cost of the key man life insurance contemplated by Section 6.9; 






	(D)	 	any
other indirect charge to the Company from Buyer or Hudson Valley, including,
          but not limited to, indirect charges relating to sales and marketing,
          administration, finance and human resources, provided, however,
          that if any such indirect charge replaces an existing expense on the Company
(as           of the Closing Date), the indirect charge will be included in the Pre-Tax
          Earnings Calculation, but not in an amount greater than the existing expense,
          adjusted yearly for normal increases or decreases; 






	(E)	 	the
cost of the issuance and exercise of options to purchase shares of Hudson
          Valley Common Stock granted to the Employees of the Company named on Schedule
          5.10(a) pursuant to Section 5.10; 






	(F)	 	fifty
(50) percent of the physical plant start-up costs of the Company’s           future
office to be located in Yonkers, New York, with any improvements thereto           to be
approved by Arnold R. Schmeidler, excluding any Company employee costs,           which
shall be the expense of the Company and amortized over five years; 






	(G)	 	the
costs for personnel to perform any technology integration integrating the
          Company’s technology with Buyer’s technology; and 






	(H)	 	any
other expense that Buyer and the Stockholders’ Representative agree in
          writing to exclude. 






	



        If
the Company is required to use any of Buyer’s or Hudson Valley’s central
resources after the Closing Date and such resources or services can be obtained by the
Company at a lower expense from a third-party provider, then upon evidence presented by
the Stockholders’ Representative reasonably satisfactory to Buyer, the lower expense
shall apply for the purpose of calculating the Company’s Pre-Tax Earnings for that
period. During the first five Earn-Out Years, the Company shall pay to Buyer 15% of all
investment advisory and/or investment management fees (the “Referral
Fee”) received by the Company from any Person who becomes a Client of the Company
through a referral from Buyer or any Affiliate of Buyer; provided, however,
that at the end of the first Earn-Out Year, Buyer and the Sellers shall review the
Referral Fee and make any adjustments upon which Buyer and Arnold R. Schmeidler may
mutually agree in writing are appropriate. 



10 
















	




                  (vii)       
          For a period of 60 days after the end of the Earn-Out Year to which an Earn Out
          relates, Buyer and the Stockholders’ Representative will cooperate to
          determine the amount of any Earn Out. If the parties agree to the amount of the
          Earn-Out, Buyer shall pay such Earn Out to the Sellers within five (5) Business
          Days after such agreement, and prior to or contemporaneously with making any
          Earn Out payment required hereunder, Buyer will deliver to each Seller a
          certificate of Buyer’s Chief Financial Officer setting forth the
          calculations by which Buyer and the Stockholders’ Representative derived
          the amount of the payment due to each Seller and certifying their accuracy. If
          the parties cannot agree to the amount of the Earn Out within the 60-day period
          referred to above, then not later than five Business Days after the expiration
          of such 60-day period, Buyer shall pay the Earn Out that it has determined is
          due to the Sellers, and contemporaneously therewith, Buyer shall deliver to each
          Seller a certificate of Buyer’s Chief Financial Officer setting forth the
          calculations by which Buyer derived the amount of the payment due to each Seller
          and certifying their accuracy. If the Stockholders’ Representative
          disagrees with the calculation of the Earn Out, he shall give notice thereof
          within thirty (30) days after the Certificate Date to Buyer together with the
          Stockholders’ Representative’s calculation of the amount of the Earn
          Out, and Buyer and the Stockholders’ Representative shall negotiate in good
          faith to resolve such dispute. If they cannot resolve such dispute within 30
          days after the date on which Sellers’ Representative shall have given such
          notice, either party may submit the dispute to the Arbiter for resolution.
          Judgment on the award rendered by the Arbiter may be entered in any court having
          jurisdiction thereof. Each party shall bear their own expenses and the cost of
          the Arbiter shall be split evenly between the Sellers and Buyer. 













	(c)	 	Change-in
Control or Termination Without Cause or Resignation for Good Reason-Effect on Payments. 






	




                  (i)       
          In the event that (x) a Change in Control occurs or (y) Arnold R. Schmeidler is
          terminated “Without Cause” or resigns for “Good Reason”
          (both as defined in the Schmeidler Employment Agreement), (i) all 25,000
          Incentive Shares shall be issued by Hudson Valley as soon as practicable to the
          Sellers (but not later than forty-five (45) days after an event described in
          this Section 2.2(c)(i) occurs) without regard to the aggregate Pre-Tax Earnings
          of the Company or the passage of time and (ii) the Earn Outs shall continue to
          be paid by Buyer to the Sellers; provided, however, that the
          minimum Earn Out paid to Sellers by Buyer for any Earn-Out Year after an event
          described in this Section 2.2(c)(i) occurs shall be equal to the highest Earn
          Out paid to the Sellers during any prior Earn-Out Year (the “Minimum
          Earn Out Payment”). In the event that the Minimum Earn Out Payment for
          an Earn-Out Year following an event described in this Section 2.2(c)(i) is less
          than the Earn Out determined in accordance with Section 2.2(b) hereof, the
          Sellers shall receive the Earn Out for that Earn-Out Year rather than the
          Minimum Earn Out Payment. If an event described in this Section 2.2(c)(i) occurs
          during the first Earn-Out Year, then the Pre-Tax Earnings of the Company shall
          be presumed to be $1,314,000 and the Minimum Earn Out Payment shall be equal to
          $1,051,000 for the first Earn-Out Year. 



11 















	





                  (ii)       
          In the event of both (x) a Change in Control and (y) Arnold R. Schmeidler is
          terminated “Without Cause” or resigns for “Good Reason”
          (both as defined in the Schmeidler Employment Agreement), all 5,000 Competition
          Shares shall be issued by Hudson Valley as soon as practicable to the Sellers
          (but not later than forty-five (45) days after the occurrence of both a Change
          in Control and the termination of Arnold R. Schmeidler “Without Cause”
          or he resigns for “Good Reason” (both as defined in the Schmeidler
          Employment Agreement), without regard to the terms of the Schmeidler Employment
          Agreement or the passage of time. 



             (d)       
          Rejected Acquisition — Effect on Payments. In the event that Buyer
          purchases another investment adviser or hires a group of persons who register
          with the SEC as an investment adviser (an “Acquisition”), Buyer
          will seek the approval of Arnold R. Schmeidler. In the event that
          Arnold R. Schmeidler does not approve of the Acquisition (a
          “Rejected Acquisition”), Buyer may proceed with the Rejected
          Acquisition; provided, however, that following the consummation of
          the Rejected Acquisition, (i) the Earn Out paid to the Sellers by Buyer for any
          Earn-Out Year following the Rejected Acquisition shall be equal to the Minimum
          Earn-Out Payment, and (ii) 12,500 of the Incentive Shares shall be issued by
          Hudson Valley as soon as practicable to the Sellers (but not later than
          forty-five (45) days after the consummation of the Rejected Acquisition);
          provided, however, that in such an event, the Sellers shall be
          entitled only to the Minimum Earn-Out Payment (and no higher amount that
          Sellers would otherwise have been entitled to receive for any subsequent
          Earn-Out Year under Section 2.2(b)(i)) and shall forfeit all rights to the
          remaining 12,500 Incentive Shares, notwithstanding Section 2.2(b)(ii) or any
          other rights the Sellers may have under this Agreement. If a Rejected
          Acquisition occurs during the first Earn-Out Year, then the Pre-Tax Earnings of
          the Company shall be presumed to be $1,314,000 and the Acquisition Earn Out
          Payment shall be equal to $1,051,000 for the first Earn-Out Year.
          Notwithstanding anything in this Section 2.2(d), Buyer shall not merge the
          Company with or into any Person nor shall the Company acquire the stock or
          assets of any Person other than in the ordinary course of business without the
          express written consent of Arnold R. Schmeidler. 



        2.3.       
Adjustment of Initial Payment; Estimate. 



             (a)       
          The Initial Payment shall be adjusted as follows: 



                  (i)       
          if Stockholders’ Equity on the Closing Date is equal to or greater than
          $200,000 and the cash and cash equivalents of the Company are equal to or
          greater than $150,000 on the Closing Date, then the Initial Payment shall be
          increased by an amount equal to the difference between $200,000 and the
          Stockholders’ Equity on the Closing Date; 



                  (ii)       
          if Stockholders’ Equity on the Closing Date is equal to or greater than
          $200,000 on the Closing Date, but the cash and cash equivalents of the Company
          on the Closing Date are less than $150,000, then the Initial Payment shall be
          (A) increased by the amount, if any, by which (x) difference between $200,000
          and the Stockholders’ Equity on the Closing Date, exceeds (y) the
          difference between $150,000 and the cash and cash equivalents of the Company on
          the Closing Date, or (B) reduced by the amount, if any, by which (x) the
          difference between $150,000 and the cash and cash equivalents of the Company on
          the Closing Date, exceeds (y) difference between $200,000 and the
          Stockholders’ Equity on the Closing Date; and 



12 
















	





                  (iii)       
          if the Stockholders’ Equity on the Closing Date is less than $200,000, then
          the Initial Payment shall be reduced by the difference between $200,000 and the
          Stockholders’ Equity on the Closing Date. 



             (b)       
          Five Business Days prior to the Closing, the Sellers shall deliver to Buyer the
          then current balance sheet of the Company and the Sellers’ reasonable, good
          faith estimate (the “Estimate”) of the Stockholders’
          Equity and the cash and cash equivalents of the Company as of the Closing. If
          the Estimate indicates that the Initial Payment should be increased pursuant to
          clauses (i) or (ii) of Section 2.3(a), then Buyer shall pay to the Sellers at
          the Closing the Initial Payment as so increased; and if the Estimate indicates
          that the Initial Payment should be reduced pursuant to clauses (ii) or (iii) of
          Section 2.3(a), then Buyer shall pay to the Sellers at the Closing the Initial
          Payment as so reduced (the Initial Payment, as so adjusted, being referred to
          herein as the “Estimated Adjusted Initial Payment”). 



             (c)       
          For the purposes of this Agreement, cash and cash equivalents of the Company as
          of the Closing Date shall include all balance sheet amounts included under
          “Receivables from Brokers” that the Company has customarily treated as
          cash equivalents. 



      2.4.       
Closing Statement; Final Adjustment of Initial Payment.



             (a)       
          Within 60 days after Closing, Buyer shall deliver to the Stockholders’
          Representative a statement (the “Closing Statement”) setting
          forth the balance sheet of the Company and the Stockholders’ Equity as of
          the Closing Date, together with a calculation of the final adjustment, if any,
          to the Initial Payment in accordance with Section 2.3(a). If the
          Stockholders’ Representative objects to the information set forth therein,
          the Stockholders’ Representative shall, within 30 days after delivery of
          the Closing Statement, deliver a written notice (the “Disputed Items
          Notice”) to Buyer specifying in detail the basis for such objection and
          setting forth the Stockholders’ Representative’s computation of the
          items in dispute (each, a “Disputed Item”). Buyer and the
          Stockholders’ Representative shall promptly attempt to resolve the Disputed
          Items and agree upon a final Closing Statement. 



             (b)       
          If the Sellers and Buyer shall be unable to resolve the Disputed Item(s) in the
          Disputed Items Notice within 15 days after delivery thereof, the Arbiter shall
          resolve the Disputed Item(s) and determine the Stockholders’ Equity as of
          the Closing (the “Final Determination”); provided,
          however, the Arbiter shall only determine those items set forth in the
          Disputed Items Notice. The Final Determination shall be rendered by the Arbiter
          to the Sellers and Buyer within 60 days after expiration of the 15-day time
          frame set forth in this Section 2.3(c). The Final Determination shall be final
          and binding on the parties hereto (except for manifest error) and may not be
          disputed by Sellers or Buyer in any forum or by any means and shall hereinafter
          be referred to as the “Final Closing Statement.” 



             (c)       
          If Stockholders’ Representative shall not have delivered a Disputed Items
          Notice to Buyer within 30 days after delivery of the Closing Statement, the
          Sellers shall be deemed to have accepted by written notice to Buyer the Closing
          Statement; such Closing Statement shall be conclusively presumed to be true and
          correct in all respects, except for manifest error, and shall be binding upon
          the parties hereto and may not be disputed by any party in any forum or by any
          means, and shall hereinafter be referred to as the “Final Closing
          Statement.” 



13 















	





             (d)       
          If the Initial Payment as adjusted pursuant to the Final Closing Statement (the
          “Final Adjusted Initial Payment”) exceeds the Estimated
          Adjusted Initial Payment, then within ten (10) Business Days after the Final
          Closing Statement is determined, Buyer shall pay to the Sellers the amount of
          such excess. If the Estimated Adjusted Initial Payment exceeds the Final
          Adjusted Initial Payment, then within ten (10) Business Days after the Final
          Closing Statement is determined, the Sellers shall pay to Buyer the amount of
          such excess. 



             (e)       
          Notwithstanding the final determination of the Stockholders’ Equity and the
          Final Closing Statement, Sellers shall remain obligated to indemnify Buyer in
          accordance with Section 9 hereof and the fact that Buyer may have agreed to the
          final Stockholders Equity shall not prevent Buyer from receiving the benefit of
          such indemnification in accordance therewith. However, any liabilities accrued
          on the balance sheet included in the Final Closing Statement will not constitute
          a breach of any of the Sellers’ and the Company’s representations and
          warranties in this Agreement, and will not give Buyer the right to
          indemnification hereunder, but only to the extent that Buyer’s Losses with
          respect to any such breach do not exceed the amount accrued on the balance sheet
          included in the Final Closing Statement. 



             2.5.       
Closing.  Subject to the conditions set forth in Sections 6
          and 7 of this Agreement, the Closing will take place at the offices of Pitney
          Hardin LLP, New York, New York, on the last Business Day of the month (or such
          other date as the parties shall agree to) in which all conditions to the
          obligations of Buyer and Sellers under Sections 6 and 7 of this Agreement, other
          than those requiring Closing Deliveries, have been satisfied. 



             2.6.       
Deliveries at the Closing.  Subject to the provisions of
          Sections 6 and 7 hereof, at the Closing: 



             (a)       
          Sellers agree to deliver to Buyer: 



                  (i)       
          certificates representing the Shares duly endorsed for transfer to Buyer; and 



                  (ii)       
          all opinions, certificates and other instruments and documents contemplated
          under Section 6 to be delivered by Sellers at or prior to the Closing. 



14 
















	




             (b)       
          Buyer agrees to deliver to Sellers: 



                  (i)       
          the Initial Payment by wire transfer of immediately available funds to such
          accounts as the Sellers may specify in writing to Buyer, and 



                  (ii)       
          all opinions, certificates and other instruments and documents contemplated
          under Section 7 to be delivered by Buyer or the Company at or prior to the
          Closing. 



SECTION 3.  REPRESENTATIONS AND WARRANTIES REGARDING SELLERS AND THE COMPANY 



        Sellers
hereby jointly and severally represent and warrant to Buyer as follows: 



             3.1.       
Organization and Good Standing of the Company.   The Company
          is duly incorporated and is validly existing as a corporation in good standing
          under the laws of the State of New York, and has the corporate power and
          authority to own, lease and operate the property used in its business and to
          carry on its business as now being conducted. The Company is registered to do
          business in all jurisdictions in which the character of the properties owned or
          held under lease by it makes qualification necessary, except where the failure
          to so register would not result in a Material Adverse Effect. Schedule 3.1
          contains true and complete copies of the Certificate of Incorporation and all
          amendments thereto of the Company to the date hereof and the By-Laws of the
          Company as in effect on the date hereof. The minute books and stock transfer
          ledgers of the Company have been made available to Buyer prior to the execution
          of this Agreement and accurately reflect the actions of the Company and all
          record transfers prior to the execution of this Agreement in the capital stock
          of the Company and the originals thereof will be delivered to the Company at
          Closing. 



             3.2.       
          Subsidiaries.   The Company does not have any Subsidiaries. 



             3.3.       
Capitalization; Title to Shares.   The authorized capital
          stock of the Company consists of 100,000 shares of Common Stock of which 20,000
          shares are issued and outstanding. All of such issued and outstanding shares of
          Common Stock are owned by the Sellers as set forth in Schedule 2.2(a). All of
          the Shares have been duly authorized and validly issued, and are fully paid and
          nonassessable. Except as set forth in Schedule 3.3, there is no security,
          option, warrant, right, call, subscription agreement, commitment or
          understanding of any nature whatsoever to which any of the Sellers or the
          Company is a party, that directly or indirectly (i) calls for the issuance,
          sale, pledge or other disposition of any shares of capital stock of the Company
          or any securities convertible into, or other rights to acquire, any shares of
          capital stock of the Company, (ii) obligates Sellers or the Company to grant,
          offer or enter into any of the foregoing or (iii) relates to the voting or
          control of such capital stock, securities or rights. Sellers have good and
          marketable title to the Shares, free and clear of any Liens. 



             3.4.       
Authority, Approvals and Consents.   This Agreement has been
          duly executed and delivered by the Company and the Sellers and constitutes a
          valid and binding obligation of the Company and each Seller, enforceable against
          the Company and each Seller in accordance with its terms, except as
          enforceability may be limited by applicable bankruptcy, insolvency,
          reorganization, moratorium or similar laws affecting creditors’ rights
          generally or by the principles governing the availability of equitable remedies.
          The Company has full right, power and authority to execute, deliver and perform
          this Agreement, and all proper actions of the officers, directors and
          shareholders of the Company authorizing and adopting the execution, delivery and
          performance hereof have been taken. Except as otherwise set forth in Schedule
          3.4, the execution, delivery and performance of this Agreement by Sellers and
          the consummation of the transactions contemplated hereby do not and will not: 



15 















	





             (a)       
          contravene any provisions of the Certificate of Incorporation or By-Laws of the
          Company; 



             (b)       
          (after notice or lapse of time or both) conflict with, result in a breach of any
          provision of, constitute a default under, result in the modification or
          cancellation of, or give rise to any right of termination in respect of, any
          material contract, agreement, commitment, understanding or arrangement of any
          kind to which Sellers or the Company is a party or to which any of the Sellers
          or the Company’s property is subject; 



             (c)       
          violate or conflict with any Legal Requirements applicable to Sellers or to the
          Company; or 



             (d)       
          except for filings with the NASD and as contemplated by Section 5, require any
          authorization, consent, order, permit or approval of, or notice to, or filing,
          registration or qualification with, any governmental, administrative or judicial
          authority by the Company. 



             3.5.       
Financial Statements. 



             (a)       
          Schedule 3.5(a) includes true, complete and correct copies of the Company’s
          audited balance sheets (the “Audited Balance Sheets”) as of
          December 31, 2003 (the “Balance Sheet Date”) and December 31,
          2002, and the related audited income statements and schedules of retained
          earnings and statements of cash flows for the years ended December 31, 2003 and
          2002 (collectively, the “Company Financial Statements”). The
          Company Financial Statements have been prepared in accordance with GAAP
          consistently applied. The Audited Balance Sheets present fairly the financial
          condition of the Company as of the dates indicated thereon, and each of the
          income statements, schedules of retained earnings and statements of cash flows
          included in the Company Financial Statements presents fairly the results of the
          operations of the Company for the periods indicated thereon. Since the Balance
          Sheet Date, there have been no material changes in the Company’s accounting
          policies. 



             (b)       
          Except as and to the extent reflected, disclosed or reserved against in the
          audited balance sheet of the Company as of the Balance Sheet Date included in
          the Company Financial Statements (the “2003 Balance Sheet”)
          (including the notes thereto) or listed on Schedule 3.5(b), to the Knowledge of
          the Sellers, as of the Balance Sheet Date the Company did not have any
          obligation or liability, whether absolute, accrued, contingent or otherwise. 



        3.6        
Absence of Change. 



             (a)       
          Except as set out in Schedule 3.6(a), since the date of the most recent of the
          Company Financial Statements, there has been no change in the financial position
          or results of operations of the Company that would result in a Material Adverse
          Effect. 



             (b)       
          Except as set forth in Schedule 3.6(b), since February 11, 2004, the Company has
          not undertaken any of the activities listed in Section 5.11(i) through (xi). 



             3.7.       
Taxes.   



             (a)       
          Except as set forth on Schedule 3.7(a): 



16 














	






                  (i)       
          all Tax Returns for all periods which end prior to or which include the date
          hereof that are or were required to be filed prior to the date hereof by or on
          behalf of the Company have been or shall be filed on a timely basis in
          accordance with the applicable laws of each Governmental Authority; 



                  (ii)       
          all such Tax Returns that have been filed were, when filed, and continue to be,
          true, correct and complete in all material respects; 



                  (iii)       
          the Company has paid, or made adequate provision in its financial statements for
          the payment of all Taxes that have or may become due and payable by the Company
          for all periods which end prior to or which include the date hereof, including
          all Taxes reflected on the Tax Returns referred to in this Section 3.7, or in
          any assessment, proposed assessment or notice, either formal or informal,
          received by the Company; 



                  (iv)       
          the Company currently is not the beneficiary of any extension of time within
          which to file any Tax Return; 



                  (v)       
          the Company has received no claim by a Governmental Authority in a jurisdiction
          where the Company does not file Tax Returns that it is or may be subject to
          taxation by that jurisdiction; 



                  (vi)       
          all Taxes that the Company was or is required by Legal Requirements to withhold
          or collect, have been duly withheld or collected and, to the extent required,
          have been paid to the appropriate Governmental Authorities; 



                  (vii)       
          except for Liens for current Taxes not yet due, there are no Liens with respect
          to Taxes upon any of the assets of the Company; 



                  (viii)       
          there are not pending or, to the Knowledge of the Company, threatened actions or
          proceedings for the assessment or collection of Taxes against the Company; 



                  (ix)       
          the Company has not received from any Governmental Authority: (i) any notice
          indicating an intent to open an audit or other review; (ii) request for
          information related to Tax matters; or (iii) notice of deficiency or proposed
          adjustment for any amount of Tax proposed, asserted, or assessed by any
          Governmental Authority against the Company; 



                  (x)       
          the Company has not waived any statute of limitations in respect of Taxes or has
          agreed to any extension of time with respect to a Tax assessment on deficiency 



                  (xi)       
          the Company is not a party to any agreement or arrangement that would result,
          separately or in the aggregate, in the actual or deemed payment by the Company
          of (i) any “excess parachute payments” with the meaning of §280G
          of the Code (or any corresponding provision of state, local or foreign Tax law),
          and (ii) any amount that will not be fully deductible as a result of Section
          162(m) of the Code (or any corresponding state, local, or foreign Tax law); 



                  (xii)       
          the Company has no liability for any Taxes of any Person (other than the
          Company) under Regulations §1.1502-6 (or similar provisions of state,
          local, or foreign law) as a transferee or successor of another party or by
          contract or otherwise; 



17 
















	




                  (xiii)       
          the Company has maintained such records in respect to each transaction, event
          and item (including as required to support otherwise allowable deductions and
          losses) as are required under applicable Tax law; 



                  (xiv)       
          the Company has not made any election under §341(f) of the Code (or any
          corresponding provision of state, local or foreign income Tax law); 



                  (xv)       
          the Company is not a party to or bound by any Tax allocation or Tax sharing
          agreement and has no current or potential contractual obligation to indemnify
          any other person with respect to Taxes; 



                  (xvi)       
          none of the assets that the Company is or shall be required to treat as being
          owned by another person pursuant to the provisions of §168(f)(8) of the
          Internal Revenue Code of 1954, as amended and in effect immediately before the
          enactment of the Tax Reform Act of 1986, or is “tax-exempt property”
          within the meaning of §168(h)(1) of the Code; 



                  (xvii)       
          the unpaid Taxes of the Company: (A) did not as of the most recent fiscal
          quarter end exceed the reserve for Tax liabilities (rather than the reserve for
          deferred Taxes to reflect timing differences between book and Tax income) on the
          books of the Company at that time, and (B) as adjusted for the passage of time
          through the Closing Date will not exceed the reserve for Tax liabilities (rather
          than the reserve for deferred Taxes to reflect timing differences between book
          and Tax income) on the books and records of such entity as of the Closing Date
          determined in accordance with the prior practices and customs of the Company in
          filing Tax Returns; 



                  (xviii)       
          the Company uses the accrual method of accounting for Tax accounting purposes; 



                  (xix)       
          the Company is not a United States real property holding corporation within the
          meaning of Code §897(c)(2) during the applicable period specified in Code
          §897(c)(1)(A)(ii); and 



                  (xx)       
          to the Knowledge of the Company, there are no proposed reassessments of any
          property owned by the Company or other proposals that are reasonably likely to
          increase the amount of any Tax to which the Company would be subject. 



             (b)       
          The Company is and has been a validly electing S Corporation for federal income
          Tax purposes, within the meaning of Section 1361 and 1362 of the Code, at all
          times since January 1, 1987. The election to be treated as an S Corporation is
          valid, and there is no claim or proceeding pending, or the Knowledge of the
          Company, threatened, challenging the validity of such election before any
          Regulatory Agency or otherwise. 



             (c)       
          The Company is and has been a validly existing S Corporation for state income
          Tax purposes in each state in which the Company is required to file Tax Returns
          since January 1, 1987, and none of the Company, the Sellers, or, to the
          Knowledge of the Company, any Governmental Authority within which the Company is
          required to file Tax Returns has taken a position which is inconsistent with
          such treatment. 



18 















	





             (d)       
          The Company shall not be liable for any Tax under Section 1374 of the Code in
          connection with the deemed sale of the Company’s assets caused by the
          Section 338(h)(10) Election. The Company has not, in the past ten (10) years,
          (A) acquired assets from another corporation in a transaction in which the
          Company’s Tax basis for the acquired assets was determined, in whole or in
          part, by reference to the Tax basis of the acquired assets in the hands of the
          transferor or (B) acquired the stock of any corporation that is a qualified
          subchapter S subsidiary. 



             3.8.       
          Property.   



             (a)       
          Schedule 3.8(a) identifies all real property leased or subleased to the Company
          (the “Leased Real Property”). Schedule 3.8(a) contains true, correct
          and complete executed copies of the leases and subleases listed on Schedule
          3.8(a) (collectively, the “Leases”). With respect to the Leased Real
          Property and each of the Leases: 



                  (i)       
          such Lease is legal, valid, binding, enforceable, and in full force and effect; 



                  (ii)       
          neither the Company, nor to the Knowledge of the Company, any other party to
          such Lease is in breach or default, and to the Knowledge of the Company, no
          event has occurred which, with notice or lapse of time, would constitute a
          breach or default or permit termination, modification, or acceleration of such
          Lease; 



                  (iii)       
          neither the Company, nor to the Knowledge of the Company, any other party to
          such Lease has repudiated any provision thereof; 



                  (iv)       
          there are no disputes, oral agreements, or forbearance programs in effect as to
          such Lease; 



                  (v)       
          in the case of each Lease which is a sublease, the representations and
          warranties set forth in clauses 3.8(a)(i) through (iv) are true and correct with
          respect to the underlying lease; 



                  (vi)       
          the Company has not assigned, transferred, conveyed, mortgaged, deeded in trust,
          or encumbered any interest in the leasehold or subleasehold created pursuant to
          such Lease; and 



                  (vii)       
          none of the Leases has been modified in any respect, except to the extent that
          such modifications are in writing and have been delivered or made available to
          Purchaser. 



             (b)       
          Schedule 3.8(b) lists each item of personal property having a value in excess of
          $10,000 owned by the Company as of February 29, 2004. Except as set forth
          in Schedule 3.8(b) or disposed of in the ordinary course of business, the
          Company has good, valid and marketable title to all personal property reflected
          on the audited consolidated financial statements of the Company for the year
          ended December 31, 2003 or acquired by it after the date thereof, and such
          personal property is held free and clear of: 



                  (i)       
          all leases, licenses and other rights to occupy or use such property; and 



19 
















	




                  (ii)       
          all Liens. 



             (c)       
          The Company does not own nor has it ever owned any real estate. 



             3.9.       
          Contracts. 



             (a)       
          Schedule 3.9(a) contains copies of all written Material Agreements and
          descriptions of all oral Material Agreements. Schedule 3.9(a) contains: (i) all
          Material Agreements to which any Insider or, to the Knowledge of the Company,
          any Affiliate of the Company is a party and (ii) a true and complete description
          of all transactions between the Company or any employee benefit plan in which
          any Employee of the Company participates, on the one hand, and any Insider or,
          to the knowledge of the Company, any Affiliate of the Company, on the other
          hand. 



             (b)       
          Except as set forth in Schedule 3.9(b), neither the Company nor, to the
          Knowledge of the Company, any other party to any of the Material Agreements, is
          in breach of or default under any Material Agreement. The consummation of the
          transactions contemplated hereby will not (after notice or lapse of time or
          both) conflict with, result in a breach of any provision of, constitute a
          default under, result in the modification or cancellation of, give rise to any
          right of termination in respect of, any Material Agreement. 



             3.10.       
          Company Reports. 



             (a)       
          Except as set forth on Schedule 3.10(a), the Company has in all material
          respects timely filed all reports, registrations, statements, and other filings,
          together with any amendments required to be made with respect thereto, that were
          required to be filed since December 31, 2001 with any federal, state or local
          governmental or regulatory agency or authority (a “Regulatory
          Agency”), including, without limitation, the SEC or NASD (all such
          reports and statements, including the financial statements, exhibits and
          schedules thereto, being collectively referred to herein as the “Company
          Reports”) and has paid all fees and assessments payable in connection
          therewith. As of their respective dates, except as and to the extent amended or
          modified on a subsequent date prior to the date of this Agreement, each of the
          Company Reports complied in all material respects with the statutes, rules,
          regulations or orders enforced or promulgated by the Regulatory Agency
          (including the SEC or NASD) with which they were filed and did not contain any
          untrue statement of a material fact or omit to state any material fact required
          to be stated therein or necessary to make the statements therein, in the light
          of the circumstances under which they were made, not misleading. 



             (b)       
          The Company and each of its stockholders, directors, officers and employees that
          or who is required to be registered as an investment adviser, broker-dealer,
          registered representative or sales person with the SEC, the securities
          commission or any other commission of any state or any state or federal
          securities self-regulatory body is duly registered as such and such registration
          is in full force and effect. 



             (c)       
          There are no proceedings pending or, to the Company’s Knowledge,
          threatened, that are reasonably likely to result in the revocation, cancellation
          or suspension, or any adverse modification, of any permit, license, certificate
          of authority, order or approval referred to in Section 3.10(a) and the execution
          and delivery of this Agreement will not, except as set forth in Schedule
          3.10(c), result in any such revocation, cancellation, suspension, or any adverse
          modification, of any permit, license, certificate of authority, order or
          approval referred to in Schedule 3.10(a). 



20 















	





             (d)       
          Neither the Company nor, to the Knowledge of the Company, any stockholders,
          directors, officer, or employee thereof, is a party or subject to any order,
          judgment or decree (other than exemptive orders) relating to its business with
          or by any federal, state, local or foreign regulatory authority. 



             3.11.       
          Litigation; Regulatory Action.



             (a)       
          Except as set forth on Schedule 3.11(a), no complaint, claim, litigation,
          proceeding or controversy, including, without limitation, censure or acceptance,
          waiver and consent proceedings before the NASD (“Litigation”)
          before any court, arbitrator, mediator or Regulatory Agency is pending against
          the Company and, to the Company’s Knowledge, no such Litigation has been
          threatened. 



             (b)       
          Except as set forth on Schedule 3.11(b), neither the Company nor, to the
          Company’s Knowledge, any of its Employees is a party to or is subject to
          any order, decree, letter of caution, consent decree, agreement, memorandum of
          understanding or similar arrangement with, or a commitment letter or similar
          submission to, any Regulatory Agency charged with the supervision or regulation
          of broker-dealers (including, without limitation, the SEC and NASD), or the
          supervision or regulation of the Company. The Company has not received any
          notice (whether or not in writing) from any Regulatory Agency: (i) that the
          Company has or may have violated any of the statutes, rules, regulations, or
          ordinances which such Regulatory Agency enforces, or has otherwise engaged in
          any unlawful business practice, (ii) threatening to revoke any license,
          franchise, permit, or governmental authorization, (iii) requiring the Company
          (including any of the Company’s Employees, directors or controlling
          persons) to enter into an order, agreement, or memorandum of understanding (or
          requiring the board of directors thereof to adopt any resolution or policy),
          (iv) restricting or disqualifying the activities of the Company or (v) in any
          manner relating to its capital adequacy, its management or its business. 



             (c)       
          Set forth on Schedule 3.11(c) is a true and complete list, as of the date
          hereof, of all Litigation affecting the Company, its assets or its officers,
          directors or, to the Company’s Knowledge, Employees pending, or to the
          Knowledge of the Company threatened, arising out of any state of facts relating
          to the sale of securities or investment advice by the Company, or any Employees
          thereof (including, without limitation, equity or debt securities, municipal
          securities, mutual funds, insurance contracts, annuities, partnership and
          limited partnership interests, or interests in real estate. 



             (d)       
          Set forth on Schedule 3.11(d) is a true and complete list of all pending or, to
          the Knowledge of the Company, threatened complaints or arbitrations affecting
          the Company, its assets or its officers, directors or, to the Company’s
          Knowledge, Employees. 



             (e)       
          Except as disclosed in Schedule 3.11(e), there have been no examinations of the
          Company by any Regulatory Agency and no Regulatory Agency has initiated any
          proceeding or, to the Knowledge of the Company, investigation into the business
          or operations of the Company or any Company Subsidiary since December 31, 2000.
          Except as set forth on Schedule 3.11(e), there is no unresolved violation,
          criticism, or exception by any Regulatory Agency with respect to any report or
          statement relating to any examinations of the Company. 



21 















	





             (f)       
          No officer, director or associated person has been required to amend his or her
          NASD Form U-4 to provide a “yes” answer to any question concerning any
          civil or criminal proceeding or investigation, regulatory proceeding, customer
          complaint, or investigation or the possibility thereof. 



             3.12.       
          ERISA and Employees.  Except as identified on Schedule
          3.12: 



             (a)       
          with respect to all current employees (including those on lay-off, disability or
          leave of absence), former employees, and retired employees of the Company (the
          “Employees”), the Company neither maintains nor contributes to
          any (i) employee welfare benefit plans (as defined in Section 3(1) of ERISA)
          (“Employee Welfare Plans”), or (ii) any plan, policy or
          arrangement which provides nonqualified deferred compensation, bonus or
          retirement benefits, severance or “change of control” (as set forth in
          Code Section 280G) benefits, or life, disability accident, vacation, tuition
          reimbursement or other material fringe benefits (“Other
          Plans”); 



             (b)       
          the Company does not maintain, contribute to, or participate in any defined
          benefit plan or defined contribution plan which are employee pension benefit
          plans (as defined in Section 3(2) of ERISA) (“Employee Pension
          Plans”); 



             (c)       
          the Company does not contribute to or participate in any multiemployer plan (as
          defined in Section 3(37) of ERISA) (a “Multiemployer Plan”); 



             (d)       
          the Company does not maintain or have any obligation to contribute to or provide
          any post-retirement health, accident or life insurance benefits to any Employee,
          other than limited medical benefits required to be provided under Code Section
          4980B; 



             (e)       
          all Plans (and all related trusts and insurance contracts) comply in form and in
          operation in all material respects with the applicable requirements of ERISA and
          the Code; 



             (f)       
          all required reports and descriptions (including all Form 5500 Annual Reports,
          Summary Annual Reports, PBGC-1s and Summary Plan Descriptions) with respect to
          all Plans have been properly filed with the appropriate Regulatory Agency or
          distributed to participants, and the Company has complied substantially with the
          requirements of Code Section 4980B; 



             (g)       
          with respect to each Plan, all contributions, premiums or payments which are due
          on or before the Closing Date have been paid to such Plan; 



22 
















	




             (h)       
          the Company has not incurred any liability to the Pension Benefit Guaranty
          Corporation (the “PBGC”), the United States Internal Revenue
          Service, any multiemployer plan or otherwise with respect to any employee
          pension benefit plan or with respect to any employee pension benefit plan
          currently or previously maintained by members of the controlled group of
          companies (as defined in Sections 414(b) and (c) of the Code) that includes the
          Company (the “Controlled Group”) that has not been satisfied in
          full, and no condition exists that presents a material risk to the Company or
          any member of the Controlled Group of incurring such a liability (other than
          liability for premiums due the PBGC) which could reasonably be expected to have
          any adverse effect on Buyer or the Company after the Closing; 



             (i)       
          Schedule 3.12(i) contains true and complete copies of each of the Employee
          Pension Plans of the Company, and (A) Summary Plan Descriptions, (B) the two
          most recent Form 5500 Annual Reports, and (C) IRS determination letters, for
          each of such Employee Pension Plans; 



             (j)       
          Except as disclosed in Schedule 3.12(j), neither the execution of this Agreement
          nor the consummation of the transactions contemplated by this Agreement will (i)
          entitle any current or former employee of the Company to, or accelerate vesting
          in connection with, severance pay, unemployment compensation, golden parachute,
          change of control or any similar type of payment or right, or (ii) accelerate
          the time of payment, accelerate the vesting, or increase the amount, of any
          compensation or benefits due to any current employee or former employee under
          any Employee Pension Plan or Employee Welfare Plan or otherwise; and 



             (k)       
          Schedule 3.12(k) sets forth a list of all employees of the Company and their
          current compensation. Except for the other Plans listed on Schedule 3.12, the
          Company has no employee contract or non-terminable (whether with or without
          penalty) employment arrangements with any person. To the Knowledge of the
          Company and the Sellers, none of the persons listed on Schedule 3.12(k) is
          subject to a confidentiality, non-disclosure, non-solicitation or
          non-competition agreement with any person or entity other than the Company. To
          the Knowledge of the Company, none of the Persons listed on Schedule 3.12(k) is
          in breach of any such employment arrangement, or any fiduciary duty of such
          Person to the Company and no such Person has given notice to the Company or a
          Seller of any intention to terminate such Person’s employment with the
          Company, either before or after the Effective Date. The Company has not
          committed any unfair labor practices or received notice of a claim of unfair
          labor practices against it or any of its directors, officers, employees, agents
          or partners. 



             3.13.       
          Compliance with Laws. 



             (a)       
          Except as set forth in Schedule 3.13(a), the Company and its officers and
          employees: (a) in the conduct of its business, are in compliance in all material
          respects with all applicable federal, state, local, and foreign statutes, laws,
          regulations, ordinances, rules, judgments, orders or decrees applicable thereto
          or to the employees conducting such businesses, and the rules of all Regulatory
          Agencies applicable thereto, including those laws and regulations described in
          SEC Release Nos. IA-2204 and IA-2209; (b) have all permits, licenses,
          authorizations, orders and approvals of, and have made all filings, applications
          and registrations with all Regulatory Agencies that are required in order to
          permit them to own and operate the Company’s businesses as presently
          conducted; all such permits, licenses, certificates of authority, orders and
          approvals are in full force and effect and, to the Company’s Knowledge, no
          suspension or cancellation of any of them is threatened or reasonably likely;
          and all such filings, applications and registrations are current; and (c) are
          not aware of any pending or threatened investigation, review or disciplinary
          proceedings by any Regulatory Agency against the Company, or any officer,
          director or employee thereof. 



23 















	





             (b)       
          The Company and each of its employees which are or who are required to be
          registered as a broker/dealer, a registered representative, or a sales person
          with the NASD, SEC or the securities commission of any state, or foreign
          jurisdiction or any Regulatory Agency are duly registered as such and in good
          standing and such registrations are in full force and effect. All federal, state
          and foreign registration requirements have been complied with and such
          registrations as currently filed, and all periodic reports required to be filed
          with respect thereto, are accurate and complete in all material respects. 



        3.14.        
Representations and Warranties Regarding the Investment Advisory Business. 



             (a)       
          Investment Contracts and Clients. 



                  (i)       
          Each written Investment Contract and any subsequent renewal thereof (A) has been
          duly authorized, executed and delivered by the Company and is maintained with
          all other Client records by the Company; (B) to the Knowledge of the Company,
          has been duly authorized, executed and delivered by each party thereto other
          than the Company; (C) assuming such Investment Contracts (and any subsequent
          renewals thereof) constitute valid and binding obligations of the other party
          thereto, is a valid and binding agreement of the Company, enforceable in
          accordance with its terms (subject to bankruptcy, insolvency, moratorium,
          fraudulent transfer and similar laws affecting creditors’ rights generally
          and to general equity principles); (D) each of the Company and, to the Knowledge
          of the Company, the Client is in compliance with the terms of each Investment
          Contract to which it is a party, and no event has occurred or condition exists
          that constitutes or with notice or the passage of time would constitute a
          default thereunder. Except as set forth on Schedule 3.14(a), none of the
          Investment Contracts, or any other arrangements or understandings relating to
          rendering of investment advisory or management services, contains any
          undertaking by the Company to collect flat fees or to waive or reimburse any or
          all fees thereunder. As used in this Agreement, the term
          “Client” means any client to which the Company
          provides investment management services, investment advisory services, financial
          planning services, or ancillary administration or consulting services on the
          date hereof. Schedule 3.14(a)(i) sets forth a true and correct list and
          valuation of the Investment Contracts covering assets under management of the
          Company as of the close of business on the date immediately preceding the date
          hereof. 



                  (ii)       
          The accounts of each Client that are subject to ERISA have been managed by the
          Company such that the Company, in the exercise of such management, is in
          compliance with the applicable requirements of ERISA and all prohibited
          transaction class exemptions issued pursuant thereto, and consummation of the
          transactions contemplated hereby will not result in a violation of such ERISA
          requirements. 



             (b)       
          Regulatory Compliance of the Company. Except as set forth in Schedule
          3.14(b): 



                  (i)       
          The Company is and has been since July 12, 1971, duly registered as an
          Investment Adviser under the Investment Advisers Act. The Company is registered
          as an investment adviser in the states referenced in its current Form ADV (such
          states constituting all jurisdictions where such registration is required in
          order to conduct its business), and is in compliance in all material respects
          with all federal and state laws requiring registration, licensing or
          qualification as an investment adviser. Each such federal and state registration
          is in full force and effect. Schedule 3.14(b)(i) contains a true and complete
          copy of the Company’s Form ADV, as amended to date, filed with the SEC;
          copies of any state registration forms, likewise as amended to date; and copies
          of any current reports required to be kept by the Company pursuant to the
          Investment Advisers Act and rules promulgated thereunder, and required pursuant
          to applicable state statutes. The information contained in such forms and
          reports was true and complete at the time of filing in all material respects.
          The Company has filed all amendments required to be filed to its Form ADV and
          state registration forms under federal and state law. Schedule 3.14(b)(i) (or
          the Form ADV contained therein) identifies the examination and/or certification
          qualifications of each of the Company’s adviser representatives. 



24 















	





                  (ii)       
          Copies of all deficiency letters and inspection reports or similar documents
          furnished to the Company by the SEC or any self-regulatory organization since
          January 1, 2000, and the Company’s response thereto, if any, are listed on
          Schedule 3.14(b)(ii) and have been provided to Buyer. Except as listed in
          Schedule 3.14(b)(ii), the Company has not been notified by the SEC or any state
          regulatory authority or any self-regulatory organization that any inspection
          since January 1, 1998 has revealed any deficiency in any such entity’s
          record-keeping or compliance with the Investment Advisers Act, the Exchange Act,
          the Securities Act, the Investment Company Act or applicable state statutes. 



                  (iii)       
          The Company does not act as investment adviser or sub-adviser to any investment
          company registered under the Investment Company Act. Neither the Company nor any
          Seller or any other “affiliated person” of the Company, as such term
          is defined in the Investment Company Act, receives or is entitled to receive any
          compensation, directly or indirectly, (A) from any person in connection with the
          purchase or sale of securities or other property to, from or on behalf of any
          Investment Company, or (B) from any Investment Company or its security holders
          for other than bona fide investment advisory or other services. 



                  (iv)       
          During the 24 months preceding the date hereof, the Company has not received any
          written investor complaints. 



                  (v)       
          The Company has adopted a formal code of ethics and a written policy regarding
          insider trading which complies with Section 204A of the Investment Advisers Act.
          Schedule 3.14(b)(v) contains the policies of the Company with respect to
          avoiding conflicts of interest. To the Knowledge of the Company, there have been
          no violations or allegations of violations as of the date hereof of such
          policies that have occurred or been made. 



                  (vi)       
          Neither the Company nor, to the knowledge of the Company, any Person
          “associated” (as defined under the Investment Advisers Act) with the
          Company, has for the period beginning five years prior to the date hereof and
          ending on the date hereof been convicted of any crime or is or has been subject
          to any disqualification that would be a basis for denial, suspension or
          revocation of registration of an investment adviser under Section 203(e) of the
          Investment Advisers Act or disclosure under Rule 206(4)-4 thereunder or denial,
          suspension or revocation of registration of a broker-dealer under Section 15 of
          the Exchange Act, or for disqualification as an investment adviser for any
          investment company pursuant to the Investment Company Act pursuant to Section
          9(a) of the Investment Company Act, and to the Company’s knowledge there is
          no basis for, or proceeding or investigation that is reasonably likely to become
          the basis for, any such disqualification, denial, suspension or revocation. 



25 
















	




                  (vii)       
          There are no sub-advisors for any Client. 



        3.15.        
Investment Intent of Sellers. 



             (a)       
          Any Additional Consideration Shares acquired by the Sellers are being acquired
          for investment purposes only for each of the Seller’s own account, and not
          with a view to or in connection with any distribution thereof. 



             (b)       
          Each Seller is an “accredited investor” as such term is defined
          in Rule 501(a) of Regulation D under the Securities Act and has such knowledge
          and experience in financial and business matters that he is capable of
          evaluating the merits and risks of an investment in Hudson Valley Common Stock. 



             (c)       
          Each Seller acknowledges that he has been furnished by Hudson Valley during the
          course of this transaction with all information regarding Hudson Valley which he
          had requested or desired to know; that all documents which could be reasonably
          provided have been made available for inspection and review; that he has been
          afforded the opportunity to ask questions of and receive answers from duly
          authorized officers or other representatives of Hudson Valley concerning the
          terms and conditions of the offering, and any additional information which had
          been requested. 



             (d)       
          Each Seller represents that no representations or warranties have been made to
          him by Buyer, Hudson Valley, or any agent, employee or affiliate of Hudson
          Valley (other than those made in this Agreement) and in entering into this
          transaction, he is not relying on any information, other than that contained in
          the SEC public filings by Hudson Valley, this Agreement (including all Exhibits
          and Schedules) and the results of any independent investigation by him. 



             (e)       
          Each Seller acknowledges that (i) any Incentive Shares or Competition Shares
          issued to the Sellers by Hudson Valley will not be registered by Hudson Valley
          under the Securities Act or any state securities laws, and shall be issued by
          Hudson Valley in a private placement in accordance with Section 4(2) of the
          Securities Act, and Rule 506 promulgated thereunder, (ii) he may not offer, sell
          or transfer any Additional Consideration Shares unless an exemption from
          registration is available in the opinion of Hudson Valley’s counsel, and
          (iii) Hudson Valley will be required to file SEC Form D and a Form 99 with the
          Investment Protection Bureau of the State of New York in accordance with the
          blue sky laws of New York and the Sellers hereby consent to such filings. 



             3.16.       
          Derivatives.  The Company has not entered into any
          exchange-traded or over-the-counter swap, forward future, option, cap, floor or
          collar financial contracts or any other similar arrangements
          (“Derivatives Contracts”). 



             3.17.       
          Intellectual Property Rights.   Schedule 3.17 sets forth all
          the Company Intellectual Property Rights, including, without limitation all
          software and computer programs owned by or used by the Company in connection
          with its business, except for licenses of Intellectual Property Rights that do
          not have an annual license fee of more than $100 or a single license fee of more
          than $1,000. The Company possesses rights to use all trade secrets and other
          rights. Except as set forth on Schedule 3.17: 



26 


















	(a)	 	The
Company either has all right, title and interest in, or has by license or
                    otherwise, a valid and binding right to use, all Company Intellectual
Property                     Rights as currently used by the Company without conflict,
infringement or                     misappropriation of any rights of any other person or
entity; 






	(b)	 	All
registrations with and applications to governmental or regulatory
                    authorities in respect of Company Intellectual Property Rights and
disclosed on                     Schedule 3.17 are valid and in full force and effect; 






	(c)	 	There
are no restrictions on the direct or indirect transfer of any license, or
                    any interest therein, in respect of Company Intellectual Property
Rights except                     as disclosed in Schedule 3.17 and the transactions
contemplated by this                     Agreement will not cause the Company to incur
any additional expense under any                     such license; 






	(d)	 	The
Company is not in default (or with the giving of notice or lapse of time or
                    both, would be in default) in any material respect under any license
to use the                     Company Intellectual Property Rights disclosed in Schedule
3.17; 






	(e)	 	To
the Knowledge of the Company, the conduct by the Company of its business does
                    not infringe on any Intellectual Property Rights of any other Person;
and 






	(f)	 	No
claim is pending or has been made to such effect that has not been resolved. 





	



        3.18.       
Brokers.  Except for fees and expenses payable by the                     Sellers or the Company to
Putnam Lovell NBF Securities, Inc. (“Putnam                     Lovell”),
none of the Sellers nor the Company has incurred or will                     incur any
broker’s, finder’s or similar fee, commission or expense, in
                    each case in connection with the transactions contemplated by this
Agreement, it                     being understood that the Company will also pay the
fees and expenses of its                     attorneys, accountants and other
professional advisors in connection with the                     transactions
contemplated by this Agreement if accrued prior to Closing for the
                    purpose of calculating Stockholders’ Equity. Schedule 3.18
contains such                     agreement with Putnam Lovell regarding the payment of
broker’s fees.  



        3.19.       
Environmental Matters.   The Company has no Knowledge of any                     citation,
directive, inquiry, notice, order, summons, warning or other
                    communication that relates to any violation or failure to comply with
any                     Environmental Law with respect to the Company’s Leased
Property. The                     Company is, and at all times has been, in full
compliance with, and has not been                     and is not in violation of or
liable under, any Environmental Law, except where                     any such failure to
comply or violation or liability would not, individually or
                    collectively with other similar failures, violations or liabilities,
have a                     Material Adverse Effect.  



        3.20.       
Insurance.  Schedule
3.20 contains a true and complete list of all insurance policies currently in effect that
insure the business, operations or Employees of the Company or affect or relate to the
ownership, use or operation of any of the assets and properties of the Company and that
have been issued to the Company for the benefit of the Company. The insurance coverage
provided by any of the policies described above will not terminate or lapse by reason of
the transactions contemplated by this Agreement. Each policy referred to above is valid
and binding and in full force and effect, no premiums due thereunder have not been paid
and neither the Company nor any Subsidiary has received any notice of cancellation or
termination in respect of any such policy or is in default thereunder in any material
respect.  



27 















	





             3.21.       
          Labor Relations.   No Employee of the Company is presently a
          member of a collective bargaining unit and, there are no threatened or
          contemplated attempts to organize for collective bargaining purposes any of the
          Employees of the Company. 



             3.22.       
          Advertising.  All Company advertising, including without
          limitation, the Company’s website, has been reviewed and/or approved in
          accordance with applicable law by the appropriate Regulatory Agency, including,
          without limitation, the NASD. 



             3.23.       
          Anti-Money Laundering.   The Company is in compliance with
          the USA PATRIOT Act, the International Money Laundering Abatement and
          Anti-Terrorist Financing Act of 2001, and the rules and regulations thereunder,
          the Anti-Money Laundering regulations of the NASD, and any other federal or
          state anti-money laundering law or regulation applicable to the Company. 



             3.24.       
          Bank Accounts.   Set forth on Schedule 3.24 is the name and
          location of each bank and money market fund in which the Company has an account
          or accounts or safe deposit boxes, the name and number of each account or box,
          the names of persons authorized to draw thereon or having access thereto, and
          the balance of each account and the contents of each box as of the date hereof
          (or such other date indicated on Schedule 3.24). 



        3.25.  
No Material Misstatements or Omissions.   To the Knowledge of the Sellers, the
representations and warranties of the Company and the Sellers in this Agreement
(including, without limitation, the Disclosure Schedule) do not contain any untrue
statement of a material fact or omit to state any material fact necessary to make the
statements made therein not materially misleading. 



SECTION 4.  REPRESENTATIONS AND WARRANTIES REGARDING BUYER 



        Except
as disclosed in this Agreement, Hudson Valley and Buyer hereby jointly and severally
represent and warrant to the Sellers as follows: 



             4.1.       
          Organization and Good Standing of Hudson Valley and Buyer.  
          Each of Hudson Valley and Buyer is duly incorporated and is validly existing as
          a corporation in good standing under the laws of the State of New York, and has
          the corporate power and authority to own, lease and operate the property used in
          its business and to carry on its business as now being conducted. Each of Hudson
          Valley and Buyer is registered to do business in all jurisdictions in which the
          character of the properties owned or held under lease by it makes qualification
          necessary, except where the failure to so qualify would not result in a Material
          Adverse Effect. 



             4.2.       
          Power; Authorization; Consents.   Each of Hudson Valley and
          Buyer has the corporate power and authority to execute, deliver and perform this
          Agreement and to consummate the transactions contemplated hereby. The execution,
          delivery and performance of this Agreement and the consummation of the
          transactions contemplated hereby have been duly authorized and approved by the
          board of directors of each of Hudson Valley and Buyer, and, except as set forth
          on Schedule 4.2, no other proceedings on the part of Hudson Valley and Buyer are
          necessary to authorize and approve this Agreement or any of the transactions
          contemplated hereby. This Agreement has been duly executed and delivered by each
          of Hudson Valley and Buyer and constitutes a valid and binding obligation of
          each of Hudson Valley and Buyer, enforceable against of each of Hudson Valley
          and Buyer in accordance with its terms, except as enforceability may be limited
          by applicable bankruptcy, insolvency, reorganization, moratorium, or similar
          laws affecting creditors’ rights generally or by the principles governing
          the availability of equitable remedies. The execution, delivery and performance
          of this Agreement by Buyer and the consummation of the transactions contemplated
          hereby do not and will not: 



28 
















	




             (a)       
          contravene any provisions of the Certificate of Incorporation or By-Laws of
          either Hudson Valley or Buyer; 



             (b)       
          (after notice or lapse of time or both) conflict with, result in a breach of any
          provision of, constitute a default under, result in the modification or
          cancellation of, or give rise to any right of termination in respect of, any
          material contract, agreement, commitment, understanding or arrangement of any
          kind to which Hudson Valley or Buyer is a party or to which Hudson Valley’s
          or Buyer’s property is subject; 



             (c)       
          violate or conflict with any Legal Requirements applicable to Hudson Valley or
          to Buyer; or 



             (d)       
          except for filings with the State of New York Banking Department
          (“NYBD”) and the Federal Deposit Insurance Corporation
          (“FDIC”), require any authorization, consent, order, permit or
          approval of, or notice to, or filing, registration or qualification with, any
          governmental, administrative or judicial authority. 



        4.3.        
SEC Filings; Financial Statements.



             (a)       
          Hudson Valley has filed all forms, reports and documents required to be filed
          with the SEC and has made available to the Sellers copies of (i) its Annual
          Report on Form 10-K for the fiscal year ended December 31, 2003, (ii) all other
          reports or registration statements filed by Hudson Valley with the SEC since
          December 31, 2003, (iii) all proxy statements relating to Hudson Valley’s
          meetings of stockholders (whether annual or special) since December 31, 2003,
          and (iv) all amendments and supplements to all such reports and registration
          statements filed by Hudson Valley with the SEC pursuant to the requirements of
          the Securities Act or the Exchange Act ((i)-(iv) collectively, the
          “Hudson Valley SEC Reports”). Except as disclosed in
          Schedule 4.3, the Hudson Valley SEC Reports (i) were prepared as to form in all
          material respects in accordance with the requirements of the Securities Act or
          the Exchange Act, as the case may be, and (ii) did not at the time they were
          filed (or if amended or superseded by a subsequent filing, then on the date of
          such filing) contain any untrue statement of a material fact or omit to state a
          material fact required to be stated therein or necessary in order to make the
          statements therein, in the light of the circumstances under which they were
          made, not misleading. None of Hudson Valley’s Subsidiaries is required to
          file any forms, reports or other documents with the SEC. 



29 
















	




             (b)       
          Each of the consolidated financial statements (including, in each case, any
          related notes thereto) contained in the Hudson Valley SEC Reports was prepared
          in accordance with GAAP applied on a consistent basis throughout the periods
          involved (except as may be indicated in the notes thereto), and each fairly
          presents in all material respects the consolidated financial position of Hudson
          Valley and its Subsidiaries as at the respective dates thereof and the
          consolidated results of its operations and cash flows and stockholders equity
          for the periods indicated, except that the unaudited interim financial
          statements were or are subject to normal and recurring year-end adjustments. 



             4.4.       
          Brokers.   Except for fees and expenses payable by Buyer to
          MG Advisors, Inc., Buyer has not employed any broker or finder or has incurred
          or will incur any broker’s, finder’s or similar fees, commissions or
          expenses, in each case in connection with the transactions contemplated by this
          Agreement. 



             4.5.       
          Investment Intent of Buyer.   Buyer is acquiring the Shares
          delivered pursuant to this Agreement for investment purposes for its own
          account, and not with the view to or in connection with any distribution
          thereof. 



             4.6.       
          No Material Misstatements or Omissions.   The representatives
          and warranties of Buyer in this Agreement (including, without limitation, the
          Disclosure Schedule) do not contain any untrue statement of a material fact or
          omit to state any material fact necessary to make the statements made therein
          not materially misleading. 



SECTION 5.   COVENANTS 



             5.1.       
          Advisory Contracts Consents, Broker-Dealer Change in Control and Banking
          Approvals. 



             (a)       
          Investment Contracts Consent. The Company, in conjunction with Buyer,
          shall promptly cause all of the Clients under the Company’s Investment
          Contracts to be informed of the transactions contemplated by this Agreement in a
          form reviewed and approved by Buyer and shall, in compliance with the Investment
          Advisers Act, give each such Client an opportunity to consent to the assignment
          of its Investment Contract in writing. The Company shall use its commercially
          reasonable efforts to obtain the affirmative written consent to assignment of
          their Investment Contracts to the Company prior to Closing on terms at least as
          favorable to the Company as the terms of such Investment Contracts on the date
          hereof from the Company’s ten largest clients measured by Client Run Rate
          Revenue as of the date hereof (excluding El Paso Natural Gas Retirement Trust
          1230). The Company shall not be required to obtain the affirmative written
          consent to such assignment from any other Client, but consistent with applicable
          SEC no-action letters, each such other Client shall be deemed to have consented
          to the assignment of its Investment Contract if (i) it has not notified the
          Company prior to the Closing Date that it does not consent to such assignment or
          that it intends to terminate its Investment Contract, (ii) it receives one
          written notice asking for consent, and (iii) at least 30 days have elapsed since
          the mailing of a second Client Notice (30 days after the first notice)
          stating that a failure to respond will be deemed consent. Between the date
          hereof and the Closing Date or the earlier termination of this Agreement, the
          Company shall promptly (and no later than three Business Days after receipt of
          notice by the Company) report to the Buyer any withdrawal of assets under
          management or the termination, closure or contemplated termination or closure of
          any Client account. 



30 
















	




             (b)       
          NASD Approval. Immediately after the date hereof, the Sellers shall file,
          after review and approval by Buyer, an application with the NASD pursuant to
          NASD Rule 1017 for approval of the purchase of the Shares by Buyer and shall use
          its commercially reasonable efforts to obtain such approval prior to Closing.
          The Sellers shall provide Buyer and its counsel with copies of all
          correspondence between the Sellers and the NASD regarding NASD approval of
          Buyer’s purchase of the Shares. 



             (c)       
          NYBD and FDIC Approvals. Immediately after the date hereof, Buyer shall
          file, after review and approval by the Sellers, applications with the NYBD and
          the FDIC for approval of the purchase of the Shares by Buyer and shall use its
          commercially reasonable efforts to obtain such approval prior to Closing. Buyer
          shall provide Sellers and their counsel with copies of all correspondence
          between Buyer and the NYBD and the FDIC regarding the approval of Buyer’s
          purchase of the Shares. 



             5.2.       
          Compliance With Securities Law. 



             (a)       
          Within thirty (30) days after the Closing, the Company shall prepare and file
          with the SEC a Form ADV for the Company. Prior to the Closing, the Company shall
          cooperate fully with Buyer and any Person designated by Buyer in furnishing
          information needed to prepare such Form ADV. 



             (b)       
          Buyer or the Company (after the Closing) shall file, and (to the extent such
          filings are prepared or made prior to Closing), the Company shall cooperate
          fully with Buyer and any Person designated by Buyer in preparing and filing, all
          such other forms and other documents required to be filed or delivered under
          applicable federal and state laws, and regulations promulgated thereunder,
          relating to or regulating the activities of investment advisers, including
          without limitation the Investment Advisers Act, the Exchange Act and the
          Securities Act, as a result of the consummation of the transactions contemplated
          by this Agreement. 



             5.3.       
          Tax Matters. 



             (a)       
          The following provisions shall govern the allocation of responsibility as
          between Buyer, the Company and the Sellers, for certain tax matters following
          the Closing Date: 



                  (i)       
          The Company shall cause Lipsky, Goodkin & Co., P.C. (the
          “Company’s Accountant”) to prepare, at the Sellers’
          expense and in accordance with the directions of the Stockholders’
          Representative, and shall file or cause to be filed, within the time and in the
          manner provided by law, all Tax Returns of the Company for all periods ending on
          or before the Closing Date that are filed after the Closing Date, and all such
          Tax Returns shall, to the Knowledge of the Sellers, be true, correct and
          complete in all material respects when filed. To the extent permitted by
          applicable law, the Sellers shall include any income, gain, loss, deduction or
          other tax items for such periods on their Tax Returns in a manner consistent
          with the Schedule K-1‘s prepared at the direction of the Stockholders’
          Representative for such periods. Notwithstanding the foregoing provisions of
          this Section 5.3(a)(i), if Deloitte & Touche LLP (the
          “Buyer’s Accountant”) believes that there is not a
          reasonable basis for any position that the Stockholders’ Representative
          directs be taken in connection with any Tax Return referred to in the first
          sentence of this section, the Company’s Accountant, the Buyer’s
          Accountant, the Buyer and the Stockholder’s Representative shall confer
          with respect to the matter and if they are unable to resolve their differences
          the matter shall be referred to the Arbiter and the decision of the Arbiter
          shall be final and binding. 



31 















	





                  (ii)       
          Buyer and the Company, on the one hand and Sellers, on the other hand shall: (A)
          cooperate fully, as reasonably requested, in connection with the preparation and
          filing of Tax Returns pursuant to this Section 5.3 and any audit, litigation or
          other proceeding with respect to Taxes; (B) make available to the other, as
          reasonably requested, all information, records or documents with respect to Tax
          matters pertinent to the Company for all periods ending prior to or including
          the Closing Date; and (C) preserve information, records or documents relating to
          Tax matters pertinent to the Company that are in their possession or under their
          control until the expiration of any applicable statute of limitations or
          extensions thereof. The Buyer, or the Company, shall notify the
          Stockholders’ Representative of any audit by any Regulatory Agency which
          may result in an assessment for which Sellers may be liable under this Agreement
          and shall not consent to any such actual or proposed assessment without the
          prior written consent of the Stockholders’ Representative, which shall not
          be unreasonably withheld. 



                  (iii)       
          The Sellers and Buyer agree that Buyer’s purchase of the Shares is
          controlled by Section 1362(e)(6)(D) of the Code and Treasury Regulation
          1.1362-3(b)(3) wherein the 2004 calendar tax year of the Company will be treated
          as two taxable years for income Tax purposes with the first taxable year ending
          as of the Closing Date. The books of the Company shall be closed as of the
          Closing Date and items of income, loss, deduction or credit shall be determined
          for the two short taxable years in the manner in which the Company regularly
          computes its books pursuant to Section 446(a) of the Code. The
          Stockholders’ Representative and the Company shall file income Tax Returns
          for the 2004 calendar tax year in a manner consistent with the foregoing. 



             (b)       
          The Company shall, prior to the Closing, maintain its status as an
          S Corporation for federal income tax purposes and, with respect to those
          states for which the Company has filed Tax Returns which recognize
          S corporation status for state income tax purposes, state income tax
          purposes. The Company and the Sellers will not revoke the Company’s
          election to be taxed as an S corporation within the meaning of
          Sections 1361 and 1362 of the Code. The Company and the Sellers will not
          take or allow any action to be taken (other than the transactions contemplated
          by this Agreement) that would result in the termination of the Company’s
          status as a validly electing S corporation within the meaning of
          Sections 1361 and 1362 of the Code. 



             (c)       
          The parties agree as follows with respect to Section 338(h)(10) of the Code: 



                  (i)       
          The Company and the Sellers will join with Buyer in making a timely election
          under Section 338(h)(10) of the Code (and any corresponding election
          permitted under state or local tax law) with respect to the transactions
          contemplated hereby (the “Section 338(h)(10) Elections”). At
          the Closing, the Sellers shall deliver to Buyer Internal Revenue Service
          Form 8023 and any other state or local forms required for the
          Section 338(h)(10) Elections (collectively, the “Section 338
          Forms”), each of the Section 338 Forms having been signed by each of
          the Sellers. Each of the Section 338 Forms shall to the extent possible be
          completed at or prior to the Closing. To the extent that any item on a form has
          not been so completed, the parties shall agree at the Closing on the manner in
          which the item is to be determined, and the Buyer’s Accountants shall make
          that determination and complete the form; provided that the
          Company’s Accountants shall prepare the purchase price allocation to be
          used in completing the form in a manner consistent with paragraph (ii) below.
          The Sellers shall at any time and from time to time after the Closing cooperate
          with Buyer in connection with the Section 338(h)(10) Elections, including
          the signing by them of any forms that Buyer may reasonably request in order to
          accomplish the Section 338(h)(10) Elections. The Sellers will include any
          income, gain, loss, deduction, or other tax item resulting from the
          Section 338(h)(10) Elections on their Tax Returns to the extent required by
          applicable federal or state law. Buyer shall be responsible for the preparation
          and filing of the Section 338 Forms. 



32 















	





                  (ii)       
          Buyer and the Company agree that the purchase price payable in accordance with
          Section 2 hereof and the liabilities of Company (plus other relevant items) (the
          “Allocable Amount”) will be allocated to the categories of
          assets of the Company for all purposes (including Tax and financial accounting)
          as shown on the Allocation Schedule attached hereto (which reflect the
          assets and liabilities of the Company as of December 31, 2003), as adjusted to
          reflect: (i) adjustments to the Purchase Price made pursuant to this Agreement;
          (ii) changes in the amount of the Company’s liabilities from December 31,
          2003 through the Closing Date; (iii) changes in the amounts of the
          Company’s assets from December 31, 2003 through the Closing Date; and (iv)
          other adjustments reasonably agreed to among the parties; provided,
          however that the Allocable Amount shall be allocated among classes or
          categories of assets as provided by the Code and the related Treasury
          Regulations. The relative fair market values of the assets within each category
          and the amount allocated to the particular assets within each category shall be
          determined by the Company in a manner consistent with any requirements of the
          Code. Buyer, the Company and the Sellers will prepare a Form 8883 consistent
          with the principles discussed herein and attach such Form 8883 to their
          respective Tax Returns (including amended returns and claims for refund). 



             (d)       
          Buyer and the Sellers agree as follows with respect to the allocation of income
          Tax liabilities: 



        Notwithstanding
anything to the contrary contained in this Agreement, except as otherwise provided in
Section 9 or this Section 5.3(d), the Company and the Buyer shall have no obligation to
pay or make any provision for the payment of, by indemnification or otherwise, and Sellers
shall be responsible for all, Taxes of the Company for periods ending before the Closing
Date, including, but not limited to: (i) any Taxes resulting from the change in the
accounting method of the Company after the Closing Date, (ii) Taxes resulting from the
Section 338(h)(10) Election, or (iii) any Taxes payable to the City of New York as a
result of the consummation of the transaction contemplated by this Agreement, and the
Sellers will be liable directly to the applicable Regulatory Authorities for all such
Taxes. 



             (e)       
          All Tax sharing agreements or similar agreements with respect to or involving
          the Company shall be terminated as of the Closing Date and, after the Closing
          Date, the Company shall not be bound thereby or have any liability thereunder. 



33 















	





             (f)       
          After the Closing Date, Buyer shall permit the Sellers and their representatives
          reasonable access to such books and records of the Company as may be necessary
          for the purpose of confirming and reviewing the Closing Balance Sheet, for the
          purpose of preparing the Company’s final Tax Return for the period up to
          and including the Closing Date. 



        5.4
Access.   The Company will, and the Sellers will cause the Company to,
during normal business hours and upon reasonable notice to the Stockholders’
Representative, (i) provide to Buyer and its representatives full access to the premises,
property, files, books, records, documents, and other information of or concerning the
Company, (ii) furnish to Buyer and its representatives financial, technical and operating
data and other information pertaining to the business and property of the Company, (iii)
make available for inspection and copying by Buyer copies of any documents relating to the
foregoing and (iv) permit Buyer and its representatives to conduct reasonable interviews
of the employees and auditors of the Company; provided, however, that any
such investigation will be conducted in such a manner as not to interfere unreasonably
with the operation of the business of the Company. 



             5.5.       
          Announcements.   Prior to the Closing, any announcement by
          any party hereto to its customers with respect to the transactions contemplated
          hereby shall be made with the review and approval of, and in joint communication
          with, the other parties hereto. Prior to the Closing, no party hereto will issue
          any press release or otherwise directly or indirectly make any public statement
          or furnish any statement with respect to the transactions contemplated hereby
          without the prior consent of the other parties hereto, except as may be required
          by law. The Sellers and the Company acknowledge that Hudson Valley will be
          obligated to disclose this Agreement on a Form 8-K filed with the SEC. 



             5.6.       
          Consents; Cooperation.   (a) Subject to the terms and
          conditions hereof, the Sellers, Hudson Valley, and Buyer will use their
          reasonable efforts: 



                  (i)       
          to obtain prior to the earlier of the date required (if so required) or the
          Closing Date, all authorizations, consents, orders, permits or approvals of, or
          notices to, or filings, registrations or qualifications with, any governmental,
          administrative or judicial authority or any other Person that are required on
          their respective parts, for the consummation of the transactions contemplated by
          this Agreement, including, without limitation, the NYBD, the FDIC, and the NASD; 



                   (ii)       
          to defend, consistent with applicable principles and requirements of law, any
          lawsuit or other legal proceeding, whether judicial or administrative, whether
          brought derivatively or on behalf of third persons (including governmental
          authorities) challenging this Agreement or the transactions contemplated hereby; 



                  (iii)       
          to furnish to each other such information and assistance as may reasonably be
          requested in connection with the foregoing; and 



                  (iv)       
          to take, or cause to be taken, all action and to do, or cause to be done, all
          things reasonably necessary, proper or advisable under applicable laws and
          regulations to consummate and make effective the transactions contemplated by
          this Agreement. 



34 
















	




             (b)       
          To the extent that the rights of the Company under any contract may not be
          assigned without the consent or approval of another party thereto, the Company
          as soon as practicable shall use all reasonable efforts to obtain any such
          consent, and Buyer shall cooperate with the Company in connection therewith. 



             5.7.       
          Notification of Certain Matters.   Between the date hereof
          and the Closing, the Sellers, on the one hand, and Hudson Valley and Buyer, on
          the other hand, will give prompt notice in writing to the other of: (i) any
          information known to Sellers or Buyer that indicates that any representation or
          warranty of the Sellers or Buyer, as the case may be, contained herein will not
          be true and correct in any material respect as of the Closing and (ii) the
          occurrence of any event known to the Sellers, Hudson Valley or Buyer which will
          result, or has a reasonable prospect of resulting, in the failure to satisfy a
          condition specified in Section 6 or 7 hereof. The delivery of any notice by a
          party pursuant to this Section 5.7 shall not, without the express written
          consent of the other party be deemed (A) to modify or correct the
          representations or warranties of the party delivering such notice, (B) modify
          the conditions set forth in Section 6 or 7, or (C) limit or otherwise affect the
          remedies available hereunder to the party receiving such notice. 



             5.8.       
          Further Assurances.   Any time after the Closing, the
          Sellers, Hudson Valley and Buyer will, and Hudson Valley and Buyer will cause
          the Company to promptly execute, acknowledge and deliver any other assurances or
          documents reasonably requested by Hudson Valley, Buyer or Sellers, as the case
          may be, to satisfy or in connection with its obligations hereunder. 



             5.9.       
          Retention of Books and Records.   For a period of three years
          after the Closing Date, Buyer will cause the Company to retain all books,
          records and other documents pertaining to the Company in existence on the
          Closing Date and to make the same available after the Closing Date for
          examination and copying by Sellers or their representatives, at such
          Seller’s expense, upon reasonable notice. No such books, records or
          documents will be destroyed by Buyer or the Company without first advising
          Sellers in writing and providing Sellers a reasonable opportunity to obtain
          possession or make copies thereof at such Seller’s expense. 



             5.10.       
          Stock Options.   On or before the Closing, Hudson Valley
          shall grant to each Employee of the Company named on Schedule 5.10(a) who is
          employed with the Company as of the Closing Date, options to purchase shares of
          Hudson Valley Common Stock in such amounts and on such terms as are set forth on
          Schedule 5.10(b). Such grants will be made by the Hudson Valley Compensation
          Committee effective as of the Closing Date. All such stock options will be (i)
          granted as incentive stock options, pursuant to the Hudson Valley Holding Corp.
          2002 Stock Option Plan (the “Plan”), (ii) subject to the terms
          of the Plan and the related grant agreement under the Plan, including the
          requirement that each employee receiving options sign a copy of the Plan and
          execute the stock restriction agreement signed by all optionees under the Plan,
          and (iii) vest in accordance with Schedule 5.10(b). 



             5.11.       
          Conduct of Business Prior to the Closing.   From the date
          hereof to the Closing Date or earlier termination of this Agreement, the Sellers
          shall cause the business of the Company to be conducted in the ordinary course
          of business consistent with past practices and shall cause the Company to use
          its commercially reasonable efforts to preserve its current business
          organization and existing business relationships. In addition, Sellers shall not
          cause or permit the Company to do any of the following without the prior written
          consent of Buyer: 



35 


















	(i)	 	issue,
sell or distribute any shares in the Company or issue or contract to
                    issue options or rights to subscribe for shares in the Company or pay
any                     dividend or make any distribution on its Common Stock if the
dividend or                     distribution would result in the Company’s
Stockholders’ Equity as of                     the Closing Date to be less than
$200,000 or the Company’s cash and cash                     equivalents to be less
than $150,000, it being understood that the Company                     intends to make
distributions of certain property to the Sellers prior to the                     Closing
Date; 






	(ii)	 	amend
its Certificate of Incorporation or By-laws; 






	(iii)	 	make
or grant any increase in compensation or in severance or termination pay
                    to, any officer, executive officer, employee, director, agent or
consultant, or                     enter into any employment agreement with any executive
officer or other                     individual, except as may be required under
employment, collective bargaining or                     termination agreements in effect
on the date hereof or, solely with respect to                     employees other than
officers, executive officers and directors, in the ordinary                     course of
business, provided, however, that the Company may pay
                    bonuses to its employees with respect to the period from January 1,
2004 to the                     Closing Date without the consent of Buyer; 






	(iv)	 	acquire
or agree to acquire by merging or consolidating with, or by purchasing a
                    substantial portion of the assets of, or by any other manner, any
business or                     any corporation, partnership, association or other
business organization or                     division thereof or otherwise acquire or
agree to acquire, other than in the                     ordinary course of business, any
assets which are material, individually or in                     the aggregate, to the
Company; 






	(v)	 	sell,
pledge, mortgage, assign, lease, give a security interest in or otherwise
                    encumber or dispose of, or agree to do any of the foregoing with
respect to, any                     of its assets, except in the ordinary course of
business; 






	(vi)	 	enter
into, or authorize any agent to enter into, discussions (A) relating to
                    the merger or consolidation of the Company with or into any Person or
(B)                     relating to the sale of all or substantially all of the assets of
the Company; 






	(vii)	 	except
in the ordinary course of business, including with respect to the
                    purchase and sale of portfolio holdings and the entering into
Investment                     Contracts, enter into or amend any other commitment,
contractual obligation or                     transaction which calls for aggregate
payments in excess of $10,000 and which                     does not expire or is not
terminable without cost or penalty at Company’s                     option within a
90 day period; 






	(viii)	 	terminate
or amend any contract, agreement, license or instrument to which
                    Seller is a party or from which it benefits, except in the ordinary
course of                     business; 





	



36 


















	(ix)	 	take
any action which would make any of the representations or warranties of the
                    Sellers contained in this Agreement untrue or incorrect in any
material respect                     or would make it impossible to satisfy any of the
conditions contained in                     Section 6; or 






	(x)	 	lengthen
the period for payment of the Company’s accounts payable. 







	



        5.12        
Non-competition; Non-solicitation



             (a)       
          In addition to other terms defined in this Agreement, the following terms when
          used herein shall have the following meanings: 












          		         (i)       
               “Competition” means the participation, directly or indirectly,
               in the business of a Broker or Dealer or an Investment Adviser. 


               



          		         (ii)       
               “Directly or indirectly” means as an individual, partner,
               shareholder, director, officer, principal, agent, employee, consultant, adviser,
               registered representative, associated person or in any other relationship or
               capacity. 


               



          		         (iii)       
               “Broker” means a person engaged in the business of effecting
               transactions in securities for the account of others and includes brokers or
               dealers who are registered with the SEC and those who are not registered. 


               



          		         (iv)       
               “Dealer” means any person who engages either for all or part of
               his time directly or indirectly in the business of offering, buying, selling, or
               otherwise dealing or trading in securities issued by another Person. 


               



          		         (v)       
               “Investment Adviser” means a person who falls within the
               definition of investment adviser under the Investment Advisers Act, but for this
               purpose includes banks and broker-dealers otherwise excluded from the
               definition. 


               



          		         (vi)       
               “Restricted Territory” means the United States of America. 


               



          		         (vii)       
               “Securities” means any security as defined under the Securities
               Act, and includes but is not limited to, debt securities, government securities,
               municipal securities and equity securities. 


               



          		         (viii)       
               “Hudson Valley”, solely for purposes of this Section 5.12,
               means Hudson Valley Holding Corp. or any direct or indirect Subsidiary of Hudson
               Valley, including, but not limited to, the Company. 


               




	



             (b)       
          Each Seller shall not, for a period beginning on the date hereof and ending on
          the date which is two calendar years after the last day of the fifth Earn-Out
          Year (such period being referred to herein as the “Competition
          Period”), directly or indirectly, without the prior written consent of
          Hudson Valley, engage in any Competition in any Restricted Territory; provided,
          however, that such Seller may, without violating this covenant, own as a
          passive investment not in excess of 2% of the outstanding capital stock of a
          corporation which engages in Competition if such capital stock is a security
          which is actively traded on an established national securities exchange or is
          listed on NASDAQ; and further provided, that in the event that both (x) a Change
          in Control shall have occurred and (y) Arnold R. Schmeidler is terminated
          “Without Cause” or resigns for “Good Reason” (both as
          defined in the Schmeidler Employment Agreement), the restrictions of this
          Section 5.12(b) shall immediately terminate, but all other provisions of the
          Section 5.12 shall continue in full force and effect. 



37 

















	



             (c)       
          Each Seller shall not, directly or indirectly, without the prior written consent
          of Hudson Valley, for himself or on behalf of any other Person, hire or retain
          any person known by such Seller to be employed by Hudson Valley at that time or
          to have been employed by Hudson Valley within the prior six months (any such
          Person, a “Hudson Valley Employee”), or solicit or induce or
          attempt to solicit or induce any Hudson Valley Employee to leave his or her
          employment with Hudson Valley at any time during the Competition Period.
          Notwithstanding the foregoing, Hudson Valley shall consider in good faith any
          request by a Seller to waive the prohibition against hiring or soliciting Hudson
          Valley Employees with respect to any Hudson Valley Employee whose employment has
          been terminated by Hudson Valley, and such waiver shall not be unreasonably
          withheld. 



             (d)       
          Each Seller shall not, directly or indirectly, for himself or on behalf of any
          other Person, solicit, divert, take away or attempt to take away any of the
          customers of Hudson Valley or the business of any such customers or in any way
          interfere with, disrupt or attempt to disrupt any then-existing relationships
          between Hudson Valley and any of its customers with whom they shall deal, at any
          time during the Competition Period, provided, however, that each
          Seller may, without violating the covenant, subject to the Investment Advisers
          Act and the rules and regulations promulgated thereunder, trade securities in
          his own portfolio and provide investment advice to his family members free of
          charge. 



             (e)       
          Each Seller shall not during the term of this Agreement or at any time
          thereafter (except with respect to information which becomes generally known in
          the industry through no fault of such Seller, is part of public knowledge or
          literature or is lawfully received by such Seller from a third party) use or
          disclose to any Person whatsoever any confidential or proprietary information of
          Hudson Valley which he may have acquired heretofore or may hereafter acquire
          relating to the business of the Company or the business of Hudson Valley,
          including but not limited to, information relating to the business, accounts,
          financial dealings, transactions, trade secrets, intangible property, customer
          lists, plans and proposals of the Company or Hudson Valley, whether or not
          marked or otherwise identified as confidential or secret except as authorized by
          Hudson Valley or the Company or ordered by a court of competent jurisdiction. 



             (f)       
          Each Seller acknowledges that, in view of the nature of the business objectives
          of Hudson Valley in acquiring the Company and the consideration paid to such
          Seller therefor as a stockholder of the Company under the terms of this
          Agreement, the restrictions contained in paragraphs (b) through (e) hereof are
          reasonably necessary to protect the legitimate business interests of Hudson
          Valley and the Company and that any violation of such restrictions will result
          in irreparable injury to Hudson Valley and the Company for which damages will
          not be an adequate remedy. Each Seller therefore acknowledges that, if any such
          restrictions are violated, Hudson Valley and the Company shall be entitled to
          preliminary and injunctive relief (without the requirement of posting a bond). 



38 
















	




             (g)       
          The rights and remedies of Hudson Valley and the Company hereunder are not
          exclusive of, or limited by, or in limitation of, any other rights or remedies
          which they may have, whether at law, in equity, by contract or otherwise, all of
          which shall be cumulative. 



             (h)       
          Should any provision of this Agreement or part thereof be held under any
          circumstances in any jurisdiction to be invalid or unenforceable for any reason,
          including, without limitation, because of its geographic or business scope or
          duration, such provision shall be construed in such a way as to make it valid
          and enforceable to the maximum extent possible. Any invalidity or
          unenforceability of any provision in this Agreement shall not affect the
          validity or enforceability of any other provision or other part of such
          provision of this Agreement or any other agreement or instruments. 



             (i)       
          The rights of Hudson Valley hereunder may be waived only by a writing signed by
          an officer of Hudson Valley, pursuant to authorization granted by resolution of
          the board of directors of Buyer, expressly setting forth the rights so waived
          and the matters as to which they are so waived, and any such waiver shall be
          limited to the matters expressly set forth in such writing. No failure or delay
          of Hudson Valley or the Company in enforcing any of its rights hereunder at any
          time shall constitute or evidence any waiver of such rights. 



        5.13        
Right of First Refusal; Registration. 



             (a)       
          In the event that at any time, or from time to time, after acquiring any
          Additional Consideration Shares, Arnold R. Schmeidler proposes to sell in a bona
          fide sale any Additional Consideration Shares (the “Offered
          Shares”) to any Person, he shall provide Hudson Valley with at least 10
          days’ prior written notice of such sale (the “Sale
          Notice”), setting forth the terms, the price, the buyer and the
          conditions of the sale. 



             (b)       
          Within ten (10) days after receipt of the Sale Notice by Hudson Valley, Hudson
          Valley, by action of its board of directors or its designated committee, may
          elect to purchase all, but not less than all, of such Offered Shares, or may
          elect to designate a person, including an officer, director or employee of
          Hudson Valley, to purchase all but not less than all of such Offered Shares. The
          purchase price of any Offered Shares purchased under this Section 5.13 shall be
          on terms and conditions at least as favorable to Arnold R. Schmeidler as those
          set forth in the Sale Notice. If all of the Offered Shares of Arnold R.
          Schmeidler offered under the Sale Notice are not purchased by Hudson Valley or
          its designee, then all restrictions imposed upon the Offered Shares shall
          terminate and Arnold R. Schmeidler shall be free to sell the Offered Shares to
          the prospective purchaser at the price and terms set forth in the Sale Notice,
          at any time within twenty (20) days thereafter; provided, however,
          that at the end of the twenty (20) day period, all restrictions on any unsold
          Offered Shares and all remaining Additional Consideration Shares shall again be
          applicable in the same manner and under the same terms as set forth in this
          Section 5.13. Such right of first refusal shall not apply to any transfer of any
          Additional Consideration Shares to a charity or family member or by will or the
          laws of descent, provided, however, that any transferee of any Additional
          Consideration Shares shall be bound by this right of first refusal, and no
          transfer of any Additional Consideration Shares shall be valid unless the
          transferee agrees to be bound by the terms of this Section 5.13. 



39 
















	




             (c)       
          The Additional Consideration Shares shall not be registered under the Securities
          Act or under any state blue sky law and will be subject to restrictions
          thereunder; provided, however, that should any Additional
          Consideration Shares be required to be delivered by Buyer to the Sellers prior
          to the first day of the second Earn-Out Year, then any such Additional
          Consideration Shares shall either be registered for sale, or registered for
          resale, by Hudson Valley in a Registration Statement on Form S-1, S-2 or S-8
          (the “Registration Statement”). Hudson Valley agrees that under
          existing Rule 144 of the SEC, the Additional Consideration Shares may be sold
          without restriction after two years from the Closing Date, so long as the
          Sellers are not affiliates of Hudson Valley. If the Incentive and Competition
          Shares are registered for resale rather than registered for delivery to the
          Sellers: 



                  (i)       
          Each Seller agrees to furnish to Hudson Valley in writing such information
          regarding the Seller and his proposed distribution of the Incentive and
          Competition Shares as Hudson Valley may from time to time reasonably request in
          connection with the preparation of the Registration Statement or the
          registration or qualification of the Incentive and Competition Shares under
          state securities or blue sky laws; and 



                  (ii)       
          Each Seller agrees to, subject to the limitations set forth in Section 9,
          indemnify and hold harmless Hudson Valley, each director of Hudson Valley, each
          officer of Hudson Valley who signed the Registration Statement and each other
          Person, if any, who controls Hudson Valley within the meaning of Section 15 of
          the Securities Act, against and in respect of any and all Losses which are
          incurred by Hudson Valley by reason of (i) any untrue statement or alleged
          untrue statement or omission or alleged omission made in the Registration
          Statement or any amendment thereto or a prospectus contained in the Registration
          Statement or any amendment or supplement thereto in reliance upon and in
          conformity with written information furnished to Hudson Valley by the Seller
          with respect to the Seller for use therein or (ii) trades made by the
          Seller after receiving notice from Hudson Valley to suspend sales as a result of
          the occurrence of any Suspension Event (as defined below) or (iii) trades made
          by the Seller in violation of the prospectus delivery requirements of Section
          5(b) of the Securities Act. A “Suspension Event” shall exist at
          such times as circumstances exist that Hudson Valley determines in good faith on
          advice of counsel, make it impractical or inadvisable for Hudson Valley to file,
          amend or supplement the Registration Statement or such filings or to cause the
          Registration Statement or such filings to become effective or to remain
          effective or for the sale of Incentive or Competition Shares to occur under the
          Registration Statement (such circumstances to include, without limitation, (i)
          pending negotiations relating to, or consummation of, a significant acquisition,
          corporate reorganization, material proposed financing, the offer or sale of
          securities, or other similar transaction involving Hudson Valley, or (ii) the
          occurrence of some other event (X) where any of the foregoing would require
          disclosure under applicable securities laws of material information in the
          Registration Statement (or any other document incorporated into the Registration
          Statement by reference) or such state securities filings and (Y) as to which
          Hudson Valley has a bona fide business purpose for preserving confidentiality or
          which renders Hudson Valley unable to comply with SEC requirements). 



             (d)       
          Unless otherwise registered as provided in Section 5.13(c), all Additional
          Consideration Shares shall bear a legend as follows: 



40 


















	  	
THE
SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A PRIVATE PLACEMENT TRANSACTION AND
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF BY
THE HOLDER UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE IN THE OPINION OF HUDSON
VALLEY HOLDING CORP.‘S COUNSEL. 





	



             (e)       
          In addition to the legend described in Section 5.13(d), all Additional
          Consideration Shares issued to Arnold R. Schmeidler shall bear a legend as
          follows: 











	  	THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF IN ACCORDANCE WITH THE TERMS OF SECTION 5.13 OF AN ACQUISITION AGREEMENT DATED JUNE 29,
2004, AMONG THE REGISTERED HOLDER HEREOF AND HUDSON VALLEY HOLDING CORP., A COPY OF WHICH
IS ON FILE AT THE PRINCIPAL OFFICE OF HUDSON VALLEY HOLDING CORP. 





	



        5.14        
Employment of the Company’s Employees. 



             (a)       
          Buyer expects to continue employment on and after the Closing Date of all
          employees of the Company who were such immediately prior to the Closing Date
          (each a “Continued Employee” and collectively the
          “Continued Employees”). Nothing contained herein shall be
          construed to modify the “at will” employee status of those of the
          Company’s employees who are immediately prior to the Closing “at
          will” employees. 



             (b)       
          Before the Closing, Buyer and the Sellers will decide whether to continue the
          welfare plans of the Company, or to have such Continued Employees become covered
          under a welfare plan of Hudson Valley. Following the Closing, Buyer will decide,
          in accordance with legal considerations, whether to continue the ERISA plans of
          the Company or to have such Continued Employees become covered under an ERISA
          plan of Hudson Valley. No prior existing condition limitation shall be imposed
          with respect to any medical coverage plan as a result of the consummation of the
          transactions contemplated by this Agreement and the Continued Employees shall
          get credit for any deductibles already paid under existing plans for the year in
          which the Closing occurs. Further service by Continued Employees with the
          Company shall be taken into account for purpose of vesting and eligibility under
          Hudson Valley’s ERISA and welfare plans. 



             (c)       
          The Company shall establish at the beginning of each Earn-Out Year an annual
          estimated bonus pool equal to 20% of the Company’s estimated Pre-Tax
          Earnings for such Earn-Out Year, before giving effect to any incentive
          compensation paid to Company employees, including commissions paid with respect
          to the initiation of new Client accounts, discretionary bonuses, employee profit
          participation plan contributions and any other incentive compensation payments,
          during such Earn-Out Year (such incentive compensation being referred to herein
          as “Incentive Compensation”). If, at the end of any Earn-Out
          Year, 20% of the actual Pre-Tax Earnings before giving effect to Incentive
          Compensation paid during such Earn-Out Year (the “Bonus Pool”)
          exceeds the amount of the Incentive Compensation paid during such Earn-Out Year,
          the Company shall pay the balance of such Bonus Pool to the Company’s
          employees as additional bonuses (the “Additional Bonuses”). The
          allocation of the Bonus Pool, excluding any Additional Bonuses, to employees and
          the timing of any payments to be made from such Bonus Pool shall be made at the
          discretion of Arnold R. Schmeidler; the allocation of the Additional Bonuses to
          employees and the timing of any Additional Bonus payments shall be made at the
          discretion of Arnold R. Schmeidler with the prior approval of the Board of
          Directors of the Company (the “Board”) consistent with past
          Company practices, it being understood that Arnold R. Schmeidler shall himself
          not participate in the Bonus Pool or receive any Additional Bonus. 



41 















	





        5.15        
Post-Closing Governance Matters.



        Following the Closing: 



             (a)       
          Buyer expects that the business and operation of the Company will continue in a
          similar fashion by the same officers and employees as currently operating the
          business and Buyer does not expect to intrude on the Company’s method of
          management. In particular, Hudson Valley and Buyer acknowledge and agree that
          after the Closing the Company shall continue to manage the accounts of employees
          of the Company and their family members, of the Company’s profit sharing
          plan, and of the 401(k) plans of its employees either at a reduced fee or
          without fee as is the current practice until such time as those accounts are
          terminated. Buyer presently does not contemplate any eliminations of staff as a
          result of the acquisition of the Company and expects that the present
          compensation levels and policies of the Company will be maintained. The Buyer
          intends that Arnold R. Schmeidler will be primarily responsible for making
          decisions relating to the Company’s investment philosophy and strategy and
          day-to-day management of the business, both in a style and manner of operation
          consistent with past practice, to Buyer’s and the Company’s mutual
          best interests. Business strategy will be set by the Board. Buyer retains the
          right to set the Company’s future direction and to make future
          determinations to protect or to enhance its substantial investment in the
          Company. If Arnold R. Schmeidler disagrees with a business decision of the
          Board, he shall provide the Board with written notice of such objection. At the
          next meeting of the Board following such notice from Arnold R. Schmeidler, the
          Board shall have the opportunity to resolve such disagreement with Arnold R.
          Schmeidler. If the Board and Arnold R. Schmeidler are unable to resolve such
          disagreement, or Buyer, without the consent of Arnold R. Schmeidler, breaches
          this Section 5.15 in any material respect, the Sellers shall be entitled to
          elect on written notice to Buyer, within thirty (30) days of such disagreement,
          to receive (i) the Minimum Earn-Out Payment as provided in Section 2.2(d) and
          (ii) the issuance of 12,500 of the Incentive Shares as if a Rejected Acquisition
          had occurred, both subject to all of the terms and conditions of Section 2.2(d),
          including forfeiture of (x) any rights to the remaining 12,500 Incentive Shares
          and (y) receipt of the Earn-Out determined in accordance with Section 2.2(d). 



             (b)       
          Buyer expects that the members of the Board will include, but not be limited to,
          Arnold R. Schmeidler, John Wyman, and William E. Griffin. William E. Griffin
          shall serve as Chairman of the Board, and Buyer shall appoint, in its sole
          discretion, certain members of the Board of Directors of Buyer or other
          non-employees of Buyer to serve as members of the Board in such numbers as to be
          determined by Buyer. Buyer may of course make further changes as it sees fit but
          agrees to maintain Arnold R. Schmeidler and one other person of his choosing on
          the Board as long as Arnold R. Schmeidler is employed by the Company. 



42 















	





             (c)       
          After the Closing, Arnold R. Schmeidler will serve as President and Chief
          Executive Officer of the Company in accordance with the terms of the Schmeidler
          Employment Agreement. Arnold R. Schmeidler shall have such powers and duties as
          are set forth on Exhibit E attached hereto; provided,
          however, that following the Closing, any assets owned by the Company
          shall be managed by Buyer, expressly excluding any Client assets. In the event
          of the death or Permanent Disability of Arnold R. Schmeidler, the Board will
          name his successor in its sole discretion. Based on health and business issues
          at that time, it is anticipated that John Wyman shall assume the role of Chief
          Executive Officer of the Company. Any rights which Arnold R. Schmeidler has to
          approve an Acquisition or take any other action shall not survive his death or
          Permanent Disability. 



             (d)       
          After the Closing, so long as Arnold R. Schmeidler remains employed by the
          Company pursuant to the Schmeidler Employment Agreement, Buyer shall not change
          the name of the Company from “A.R. Schmeidler & Co., Inc.” to any
          other name without the prior written consent of Arnold R. Schmeidler;
          provided, however, that nothing in this Section 5.15(d) shall
          prevent Buyer from referring to the Company as a subsidiary of Buyer in any
          literature, advertising, or any other publications or materials. 



             5.16.       
          Buyer Referrals.  Not later than six months after the Closing,
          Buyer shall transfer to the Company the accounts set forth on Schedule 5.16, and
          such accounts shall be subject to the Referral Fee. 



             5.17.       
          Hudson Valley Guarantee.  Hudson Valley guarantees the payment of any
          and all obligations of Buyer and the Company (after the Closing) arising to the
          Sellers under this Agreement or to Arnold R. Schmeidler under the Schmeidler
          Employment Agreement as if Hudson Valley were directly obligated thereon, but
          only to the extent that Buyer fails to perform hereunder or thereunder. 



SECTION 6.   CONDITIONS TO
THE OBLIGATIONS OF BUYER 



        The
obligations of Buyer required to be performed by it at the Closing are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions, each of
which may be waived by Buyer: 



             6.1.       
          Representations and Warranties; Covenants.   The
          representations and warranties of the Company and the Sellers contained in
          Section 3 of this Agreement will be true and correct as of the Closing (except
          for those that are made as of a certain time, which shall be true and correct as
          of such time), except for changes contemplated by this Agreement and failures to
          be true and correct that do not result in a Material Adverse Effect. Each
          obligation of Sellers required by this Agreement to be performed by them at or
          prior to the Closing will have been duly performed and complied with in all
          material respects at the Closing. At the Closing, Buyer will have received
          certificates, dated the Closing Date and duly executed by each of the Sellers,
          to the effect that the conditions set forth in the preceding sentences have been
          satisfied. 



             6.2.       
          Opinion of Sellers’ Counsel.   Buyer will have been
          furnished with the opinion of Snow Becker Krauss P.C., dated the Closing Date,
          addressed to Buyer in form of Exhibit B hereto. In rendering such
          opinion, such counsel may rely as to factual matters upon certificates or other
          documents furnished by Sellers and officers of the Company and by government
          officials and upon such other documents and data, including opinions of local
          counsel, as such counsel deem appropriate as a basis for such opinion. 



43 















	





             6.3.       
          Arnold R. Schmeidler Employment Agreement.   Arnold R.
          Schmeidler shall have entered into the Schmeidler Employment Agreement. 



             6.4.       
          Regulatory Approvals.  The transactions contemplated by this
          Agreement shall have been approved by the NYBD, the FDIC, the NASD and by any
          other Regulatory Agency, the approval of which is required to permit
          consummation thereof (except such approvals which Section 5.2 contemplates will
          be obtained after Closing) without the imposition of any condition, requirement
          or commitment which is reasonably likely to deprive Buyer of the anticipated
          benefits of the acquisition of the Company; and all waiting periods arising
          under any applicable law shall have duly lapsed or been terminated. 



             6.5.       
          Absence of Litigation.   No action or proceeding shall have
          been instituted or threatened on or before the Closing Date before any
          Regulatory Agency pertaining to the transactions contemplated by this Agreement,
          the result of which is reasonably likely to prevent or make illegal the
          consummation of such transactions or which would be reasonably likely to have a
          Material Adverse Effect on the Company. Neither Buyer nor the Company shall be
          subject to any order, decree or injunction of a court or agency of competent
          jurisdiction which either enjoins or prohibits the consummation of any of the
          transactions contemplated by this Agreement. 



             6.6.       
          Consents.   The Company shall have obtained written consent to the
          assignment of each Material Agreement set forth on Schedule 6.6 that may not be
          assigned without the consent or approval of another party thereto, including the
          lease dated May 21, 1990, as amended, between the Company, as tenant, and Fifth
          Avenue & 46th Street Associates, as landlord, for a portion of
          the ninth floor at 555 Fifth Avenue, New York, New York. 



             6.7.       
          Investment Contracts. 



             (a)       
          All Investment Contracts to which the Company is a party as of the Closing Date
          shall be in writing, shall reflect the current fee arrangements between the
          Company and the Client, and shall provide for the receipt of compensation by the
          Company. 



             (b)       
          The Run Rate Revenues at Closing shall be not less than 85% of the Run Rate
          Revenues at Signing. If the Run Rate Revenues at Closing are less than 95% of
          the Run Rate Revenues at Signing, the Initial Payment shall be reduced by
          $100,000 for each one percent that the Run Rate Revenues at Closing are below
          95%. For example, if the Run Rate Revenues at Closing are 90%, the Initial
          Payment would be reduced by $500,000. For purposes of determining the percentage
          or Run Rate Revenues under this Section 6.7(b), any fraction of a percent shall
          be rounded up or down to the nearest whole percent, with .5% being rounded up.
          Notwithstanding the actual relationship between El Paso Natural Gas Master
          Retirement Trust 1230 and the Company as of the date hereof or as of the
          Closing, the Run Rate Revenues of El Paso Natural Gas Master Retirement Trust
          1230 as of June 1, 2004 shall be included in the calculation of Run Rate
          Revenues at Signing and shall not be included in the calculation of Run
          Rate Revenues at Closing. 



44 
















	




             (c)       
          The Company shall have obtained the affirmative written consent to assignment of
          their Investment Contracts prior to Closing on terms at least as favorable to
          the Company as the terms of such Investment Contracts on the date hereof from
          the Company’s ten largest clients measured by Client Run Rate Revenue as of
          the date hereof, excluding El Paso Natural Gas Master Retirement Trust 1230. 



             6.8.       
          Investment Adviser Registration.   The Company shall continue
          to be registered as an Investment Adviser under the Investment Advisers Act. 



             6.9.       
          Key Man Life Insurance.   The Company shall have purchased
          key man life insurance on the lives of each of Arnold R. Schmeidler and
          John Wyman in such amounts and on such terms as are reasonably satisfactory to
          Buyer. 



        6.10.     
Net Capital.   The Company will meet any net capital requirement
imposed by the rules of the SEC at the end of the month during which the Closing occurs.
Should the Company not be able to meet such net capital requirements, the Company shall
ask Buyer to contribute an amount of funds sufficient to meet such net capital
requirements, such contribution to be given by Buyer in accordance with the terms of the
Side Letter. 



             6.11.     
          Sellers’ Fees.   Sellers and the Company will have
          furnished Buyer with letters from each of Putnam Lovell, the Company’s
          accountant, Snow Becker Krauss P.C., and any other Person who provided the
          Company with professional services in connection with the sale of the Shares to
          Buyer (collectively, the “Service Providers”) stating that all
          fees due from the Company to each of the Service Providers have been paid in
          full or are, as of the Closing, owed only from the Sellers individually and not
          from the Company. 



        6.12.     
By-Laws.   The Company shall have amended its By-Laws to provide that
the number of directors on the Company’s board of directors shall be not less than
five (5) and not more than fifteen (15). 



             6.13.     
          Certificates.   Sellers and the Company will have furnished
          Buyer with such certificates of their respective officers and others as Buyer
          may reasonably request to evidence satisfaction of the conditions set forth in
          this Section 6, such certificates to be made without personal liability of such
          officer or other person signing such certificate. 



SECTION 7.   CONDITIONS TO
THE OBLIGATIONS OF THE SELLERS 



        The
obligations of the Sellers to be performed by them at the Closing are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions, each of
which may be waived by the Sellers: 



             7.1.       
          Representations and Warranties; Covenants.   The
          representations and warranties of Hudson Valley and Buyer contained in this
          Agreement will be true and correct as of the Closing (except for those made as
          of a certain date, which shall be true and correct as of such date), except for
          changes contemplated by this Agreement and failures to be true and correct that
          do not result in a Material Adverse Effect. Each obligation of Hudson Valley and
          Buyer required by this Agreement to be performed by it at or prior to the
          Closing will have been duly performed in all material respects at or prior to
          the Closing. At the Closing, Sellers will have received a certificate, dated the
          Closing Date and duly executed by an executive officer of Hudson Valley and
          Buyer (without personal liability to such officer) to the effect that the
          conditions set forth in the preceding sentences have been satisfied. 



45 
















	




             7.2.       
          Opinion of Buyer’s Counsel.   The Sellers and the
          Company will have been furnished with the opinion of Pitney Hardin LLP, dated
          the Closing Date, addressed to the Sellers and the Company in form of Exhibit
          D hereto. In rendering such opinion, such counsel may rely as to factual
          matters upon certificates or other documents furnished by officers of the Buyer
          and by government officials and upon such other documents and data, including
          opinions of local counsel, as such counsel deem appropriate as a basis for such
          opinion. 



             7.3.       
          Schmeidler Employment Agreement.   The Company shall have
          entered into the Schmeidler Employment Agreement. 



             7.4.       
          Regulatory Approvals.   The transactions contemplated by this
          Agreement shall have been approved by the NYBD, the FDIC, the NASD and by any
          other Regulatory Agency, the approval of which is required to permit
          consummation thereof without the imposition of any condition, requirement or
          commitment which is reasonably likely to have a Material Adverse Effect on the
          Company or Buyer; and all waiting periods arising under any applicable law shall
          have duly lapsed or been terminated. 



             7.5.       
          Absence of Litigation.   No action or proceeding shall have
          been instituted or threatened on or before the Closing Date before any
          Regulatory Agency pertaining to the transactions contemplated by this Agreement,
          the result of which is reasonably likely to prevent or make illegal the
          consummation of such transactions. Neither Buyer nor the Company shall be
          subject to any order, decree or injunction of a court or agency of competent
          jurisdiction which either enjoins or prohibits the consummation of any of the
          transactions contemplated by this Agreement. 



             7.6       
          Investment  Contracts.    The Run Rate  Revenues  at  Closing  shall be not less than 85% of the Run Rate  Revenues  at
Signing. 



             7.7.       
          Certificates.   Buyer will have furnished Sellers with such
          certificates of its officers and others as Seller may reasonably request to
          evidence satisfaction of the conditions set forth in this Section 7. 






SECTION 8.   TERMINATION 












	8.1.	 	Termination.  
This Agreement may be terminated at any time                     prior to the Closing: 






	(a)	 	by
mutual consent of Hudson Valley, Buyer and the Sellers; 






	(b)	 	by
Hudson Valley and Buyer, on or after the date 120 days from the date hereof,
                    if any condition contained in Section 6 (other than those requiring a
Closing                     Delivery), has not been satisfied or waived; by Sellers, on
or after the date                     120 days from the date hereof, if any condition
contained in Section 7 (other                     than those requiring a Closing
Delivery), has not been satisfied or waived; 







	



46 


















	(c)	 	by
Hudson Valley and Buyer or the Sellers, if any court of competent
                    jurisdiction or other governmental body has issued an order, decree
or ruling or                     taken any other action restraining, enjoining or
otherwise prohibiting the                     transactions contemplated by this
Agreement, and such order, decree, ruling or                     other action has become
final and non-appealable; 






	(d)	 	by
Hudson Valley and Buyer, if any condition contained in Section 6 shall become
                    incapable of fulfillment through no fault of Hudson Valley or Buyer;
or 






	(e)	 	by
the Sellers, if any condition contained in Section 7 shall become incapable
                    of fulfillment through no fault of the Sellers. 





	



        If
Hudson Valley, Buyer or the Sellers terminate this Agreement pursuant to the provisions
hereof, such termination will be effected by written notice to the other party specifying
the provision hereof pursuant to which such termination is made. 



             8.2.       
          Effect of Termination. 



             (a)       
          Upon termination of this Agreement pursuant to Section 8.1 hereof, except as
          provided in clause (b) below: 



                  (i)       
          this Agreement will forthwith become null and void; 





             (ii)                       such
termination will be the sole remedy with respect to any breach of any
               representation or warranty contained in or made pursuant to this
Agreement, and  



             (iii)                       no
party hereto or any of their respective officers, directors, employees,
               agents, consultants, stockholders or principals will have any liability or
               obligation hereunder or with respect hereto.  



        (b)        The
provisions of clause (a) above notwithstanding, no party will be relieved of
                    liability for any knowing breach (for this purpose knowledge shall be
tested as                     of the date hereof only) of any representation or warranty
contained herein or                     any breach of any covenant or agreement contained
herein.  






SECTION 9.   SURVIVAL AND
INDEMNIFICATION 



             9.1.       
          Survival.   Notwithstanding any otherwise applicable statute
          of limitations, no claim, lawsuit, or other proceeding arising out of or related
          to the breach of any representation or warranty of the parties contained herein
          may be made after March 31, 2006 except for those representations and warranties
          contained in Section 3.3, 3.7, 3.11, 3.17 or 3.23 which shall survive for a
          period of six years from the Closing Date. 



             9.2.       
          Seller’s Indemnification. 



             (a)       
          Sellers, jointly and severally, subject to the limitations set forth in this
          Section 9, will indemnify Buyer against and in respect of any and all Losses
          which are incurred by Buyer by reason of (i) the breach of any representation or
          warranty made by the Company or Sellers in Section 3 of this Agreement, (ii) any
          breach of a covenant made by the Company or Sellers in this Agreement,
          provided, however, that the Company shall have no obligation to indemnify
          Buyer for the breach of any covenant by the Company or Sellers which occurs
          between the date hereof and Closing as long as the Company or Sellers provides
          Buyer with written notice of such a breach prior to Closing (it being the
          intention of the parties hereto that Buyer’s sole remedy in the event of
          such a breach shall be the right to refuse to proceed with the Closing), (iii)
          any liability of the Company prior to Closing which is not reflected on Company
          Financial Statements or Schedule 3.6(a), or (iv) a final and nonappealable
          determination by an appropriate taxing or judicial authority that the Company
          did not qualify as an S corporation for federal income tax purposes for any
          period ending prior to the Closing for which the Company filed its federal
          income tax return as an S corporation, or that the Company did not qualify as an
          S corporation with respect to any state for any period ending prior to the
          Closing for which the Company filed its income tax return for the state as an S
          corporation, or (v) any liability for Taxes to the City of New York arising
          prior to Closing or as a result of the transactions contemplated by this
          Agreement, or (vi) any failure by the Company or the Sellers to pay in full all
          fees owed to the Service Providers. 



47 















	





             (b)       
          Notwithstanding anything to the contrary in this Agreement (but subject to the
          last sentence of this Section 9.2(b)), the aggregate liability of Sellers
          pursuant to Section 9.2(a) will not exceed the sum of (x) $1,500,000 plus (y)
          20% of the total amount of Earn Outs paid to Sellers. Notwithstanding the above,
          the limitations of this Section 9.2(b) shall not apply to a breach of the
          Company’s or the Sellers’ representations and warranties contained in
          Section 3.3, 3.7, 3.11, 3.17 or 3.23, or any other indemnification obligation of
          the Sellers under Section 9.2(a)(iv), (v) or (vi), for which the aggregate
          liability of Sellers under this Section 9.2 shall in no event exceed the
          aggregate consideration payable to the Sellers in cash pursuant to Section 2
          hereof. 



             (c)       
          Buyer may make no claim for indemnification pursuant to Section 9.2(a), (A)
          unless notice of such claim describing the basic facts or events, the existence
          or occurrence of which constitute or have resulted in the alleged breach of a
          representation or warranty has been given to the Stockholders’
          Representative during the survival period set forth in Section 9.1, or if none
          is established, for six years from the Closing Date; and (B) until such claims
          for which Losses are otherwise recoverable hereunder by Buyer are in excess of
          the aggregate of $10,000 (without taking into account any single claim of $1,000
          or less) after which Buyer will be entitled to make any such claim for amounts
          in excess of such threshold; provided that the limitations set forth in
          this clause (c) shall not apply to losses incurred by reason of a breach of the
          Company’s or Sellers’ representations and warranties contained in
          Section 3.3, 3.7 and 3.11 or 3.23 or for a claim of indemnification made under
          Section 9.2(a)(iv), (v) or (vi). 



             9.3.       
          Buyer’s Indemnification. 



             (a)       
          Buyer, subject to the limitations set forth in this Section 9, will indemnify
          the Sellers against and in respect of any and all Losses, other than Losses to
          the extent recoverable by Sellers under any applicable insurance policy and net
          of the present value of any tax benefit to Sellers as a result of such Losses,
          which may be incurred by reason of (i) the breach of any representation or
          warranty made by Buyer in Section 4 hereof or (ii) any breach of any covenant
          made by Buyer in this Agreement. 



48 















	





             (b)       
          Notwithstanding anything to the contrary in this Agreement, the aggregate
          liability of Buyer pursuant to this Section 9.3(a) will not exceed all unpaid
          amounts due to the Sellers from Buyer pursuant to Section 2.2. 



             (c)       
          No claim for indemnification may be made by Sellers pursuant to Section
          9.3(a)(i), (A) unless notice of such claim (describing the basic facts or
          events, the existence or occurrence of which constitute or have resulted in the
          alleged breach of a representation or warranty or a covenant made in this
          Agreement) has been given to the Buyer during the survival period set forth in
          Section 9.1, and (B) until such claims for which Losses are otherwise
          recoverable hereunder by Seller are in excess of the aggregate of $10,000
          (without taking into account any single claim of $1,000 or less) after which
          such Seller will be entitled to make any such claim for amounts in excess of
          such threshold. 



             9.4.       
          Claims by Third Parties.   If a party to this Agreement seeks
          indemnity hereunder with respect to a claim by a third party: 



        
        Promptly
after the receipt by any party hereto of notice of a third party claim or the commencement
of a third party action, suit or proceeding subject to indemnification hereunder (a
“Third Party Claim”), such party (the “Indemnified
Party”) will, if a claim in respect thereto is to be made against any party
obligated to provide indemnification hereunder (the “Indemnifying
Party”), give the Indemnifying Party reasonable written notice of the Third Party
Claim. The failure to provide such notice will not relieve the Indemnifying Party of any
of its or his obligations, or impair the right of the Indemnified Party to indemnification
unless, and only to the extent that, such failure materially prejudices the Indemnifying
Party’s opportunity to defend or compromise the Third Party Claim. The Indemnifying
Party will have the right, at its or his option, to defend at its or his own expense and
by its or his own counsel any Third Party Claim, provided that (i) the Indemnifying
Party acknowledges in writing (at the time the Indemnifying Party elects to assume such
defense) its or his obligation under this Section 9.4 to indemnify the Indemnified Party
with respect to such Third Party Claim, (ii) such counsel is reasonably satisfactory
to the Indemnified Party, (iii) the Indemnified Party is kept fully informed of all
developments, and is furnished with copies of all documents and papers, related thereto
and is given the right to participate in the defense and investigation thereof as provided
below, and (iv) such counsel proceeds with diligence and in good faith with respect
thereto. If an Indemnifying Party will undertake to defend a Third Party Claim, the
Indemnifying Party shall notify the Indemnified Party of its or his intention to do so
promptly (and in any event no later than 30 days) after receipt of notice of the Third
Party Claim, and the Indemnified Party shall cooperate in good faith with the Indemnifying
Party and its counsel in the defense of such Third Party Claim. Notwithstanding the
foregoing, the Indemnified Party will have the right to participate in the defense and
investigation of any Third Party Claim with its own counsel at its or his own expense,
except that the Indemnifying Party will bear the expense of such separate counsel if (A)
in the written opinion of counsel to the Indemnified Party reasonably acceptable to the
Indemnifying Party, use of counsel of the Indemnifying Party’s choice would be
expected to give rise to a conflict of interest which consent could not be waived, (B)
there are or may be legal defenses available to the Indemnified Party that are different
from or additional to those available to the Indemnifying Party, (C) the Indemnifying
Party will not have employed counsel to represent the Indemnified Party within a
reasonable time after notice of the Third Party Claim is given to the Indemnifying Party
or notice that the Indemnifying Party intends to assume the defense of the Third Party
Claim is given to the Indemnified Party or (D) the Indemnifying Party will authorize the
Indemnified Party to employ separate counsel at the expense of the Indemnifying Party. The
Indemnifying Party will not settle any Third Party Claim without the prior written consent
of the Indemnified Party, which will not be unreasonably withheld; provided,
however, that an Indemnified Party will not be required to consent to any settlement
involving the imposition of equitable remedies. 



49 
















	




             9.5.       
          Buyer’s Right to Set-Off.   If at any time the amount of
          any Losses to which Buyer is entitled to indemnification under this Section 9
          exceeds the sum of (x) $1,500,000 plus (y) 20% of the total amount of Earn Outs
          theretofore paid to Sellers, or any Losses are incurred by Buyer in connection
          with the indemnification obligations of the Sellers under Section 9.2(a)(vi),
          then Buyer shall have the right to set off against and deduct from the amount of
          each subsequent Earn Out paid to Sellers, an amount up to 20% of each such
          subsequent Earn Out until such Losses are paid in full. 



SECTION 10.   MISCELLANEOUS 



             10.1.       
          Headings.  The section headings herein are for convenience
          of reference only, do not constitute part of this Agreement and will not be
          deemed to limit or otherwise affect any of the provisions hereof. References to
          Sections, unless otherwise indicated, are references to Sections of this
          Agreement. 



             10.2.       
          Stockholders’ Representative.   The Sellers hereby
          appoint Arnold R. Schmeidler as the Stockholders’ Representative to
          represent the Sellers with respect to the negotiation of this Agreement and to
          take all acts necessary to effect its closing and implementation. In the event
          he shall at any time be unable to, or shall notify Sellers that he is unwilling
          to, continue to perform the duties of the Stockholders’ Representative,
          Albert J. Schmeidler shall succeed as Stockholders’ Representative.
          The Stockholders’ Representative may also be changed by the Sellers at any
          time and from time to time upon written notice to Buyer signed by Sellers. Buyer
          shall have the right to rely on any such notice without any duty of inquiry as
          to whether the new Stockholders’ Representative was duly appointed by the
          Sellers. 



             10.3.       
          Authority.   A decision, act, consent or instruction of the
          Stockholders’ Representative shall constitute a decision of all Sellers and
          shall be final and binding upon each such Seller, and Buyer may rely upon any
          decision, act, consent or instruction of the Stockholders’ Representative
          as being the decision, act, consent or instruction of every Seller. Buyer is
          hereby relieved from any liability to any Person for any acts done by Buyer in
          accordance with such decision, act, consent or instruction of the
          Stockholders’ Representative, except for liability arising out of fraud,
          gross negligence or bad faith under this Agreement. 



             10.4.       
          Limitation on Liability.   In dealing with this Agreement and
          in exercising or failing to exercise all or any of the powers conferred upon the
          Stockholders’ Representative hereunder, (i) the Stockholders’
          Representative shall not assume any, and shall incur no, responsibility to any
          Seller by reason of any error in judgment or other act or omission performed or
          omitted in connection with this Agreement, excepting only responsibility for any
          act or failure to act which represents gross negligence or willful misconduct,
          and (ii) the Stockholders’ Representative shall be entitled to rely on the
          advice of counsel, public accountants or other independent experts experienced
          in the matter at issue, and any error in judgment or other act or omission of
          the Stockholders’ Representative pursuant to such advice shall not subject
          the Stockholders’ Representative to liability to any Seller. The Sellers
          shall severally indemnify the Stockholders’ Representative and hold him
          harmless against any loss, liability or expense incurred without gross
          negligence or bad faith on his part and arising out of or in connection with the
          acceptance or administration of his duties hereunder. All of the indemnities,
          immunities and powers granted to the Stockholders’ Representative under
          this Agreement shall survive the termination of this Agreement. 



50 















	





             10.5.       
          Notices.   All notices and other communications hereunder
          shall be in writing and shall be deemed to have been duly received (i) on the
          date given if delivered personally or by telegram, telex or telecopy or (ii) on
          the date received if mailed by registered or certified mail (return receipt
          requested), to the parties at the following addresses (or at such other address
          for a party as shall be specified by like notice): 













		
	                                    If to Sellers:	 
	  
	                                    555 Fifth Avenue
	                                    New York, NY 10017
	                                    Attention: Arnold R. Schmeidler
	                                    Facsimile: 212-687-1392
	  
	                                    With a copy to:
	  
	                                    Snow Becker Krauss P.C
	                                    605 Third Avenue
	                                    New York, NY  10158	
	                                    Attention: Eric Honick, Esq
	                                    Facsimile: 212-949-7052
	  
	                                    If to Buyer or Hudson Valley:
	  
	                                    Hudson Valley Bank
	                                    21 Scarsdale Road
	                                    Yonkers, NY 10707
	                                    Attention:  James J. Landy
	                                    Facsimile: 914-961-7378
	  
	                                    With a copy to:
	  
	                                    Pitney Hardin LLP
	                                    7 Times Square
	                                    New York, NY  10036-7311	 
	                                    Attention: Ronald H. Janis, Esq
	                                    Facsimile:  212-682-3485	 
	  
	                                    and
	  
	                                    Griffin, Coogan & Veneruso, P.C
	                                    51 Pondfield Road
	                                    Bronxville, NY  10708	
	                                    Attention: James P. Blose
	                                    Facsimile: 914-961-1476
	





51 









	




        Either
party may by notice to the other change its address for notice and will so change its
address for notice whenever its existing address for notice ceases to be adequate for
delivery both by hand and by facsimile. 



             10.6.       
          Assignment.   This Agreement and all provisions hereof will
          be binding upon and inure to the benefit of the parties hereto and their
          respective successors and permitted assigns; provided, however,
          that no party to this Agreement may assign this Agreement or any right,
          interest, or obligation hereunder without the written consent of all other
          parties to this Agreement. 



             10.7.       
          Entire Agreement.   This Agreement (including the Disclosure
          Schedule and Exhibits hereto, and the Schmeidler Employment Agreement) embody
          the entire agreement and understanding of the parties with respect to the
          transactions contemplated hereby and thereby and supersede all prior written or
          oral commitments, arrangements or understandings with respect thereto. There is
          no restriction, agreement, promise, warranty, covenant or undertaking with
          respect to the transactions contemplated hereby and thereby other than those
          expressly set forth herein or therein. 



             10.8.       
          Amendment; Waiver. 



             (a)       
          This Agreement may only be amended or modified in writing signed by Buyer and
          the Stockholders’ Representative. 



             (b)       
          Buyer or the Stockholders’ Representative, on behalf of the Sellers, by an
          instrument in writing, may waive compliance with any term or provision of this
          Agreement on the part of such other party or parties hereto. The waiver by any
          party hereto of a breach of any term or provision of this Agreement will not be
          construed as a waiver of any subsequent breach. 



             10.9.       
          Counterparts.   This Agreement may be executed in two or more
          counterparts, all of which will be considered one and the same agreement and
          each of which will be deemed an original. 



             10.10.       
          Governing Law.   This agreement will be governed by the laws
          of the State of New York (regardless of the laws that might be applicable under
          principles of conflicts of law) as to all matters, including but not limited to
          matters of validity, construction, effect and performance. 



52 















	





        10.11.        
Expenses.    Each party will bear its own expenses in connection with this Agreement. 



             10.12.       
          Severability.   If any one or more of the provisions of this
          Agreement is held to be invalid, illegal or unenforceable, the validity,
          legality or enforceability of the remaining provisions of this Agreement will
          not be affected thereby, and the Sellers and Buyer will use their reasonable
          efforts to substitute one or more valid, legal and enforceable provisions which
          insofar as practicable implement the purposes and intent hereof. To the extent
          permitted by applicable law, each party waives any provision of law which
          renders any provision of this Agreement invalid. illegal or unenforceable in any
          respect. 



             10.13.       
          Consent to Jurisdiction.   Buyer and the Sellers hereby
          submit to the exclusive jurisdiction of the courts of the State of New York in
          respect of the interpretation and enforcement of the provisions of this
          Agreement and any related agreement and hereby waive, and agree not to assert,
          as a defense in any action, suit or proceeding for the interpretation or
          enforcement of this Agreement and any related agreement, that they are not
          subject thereto or that such action, suit or proceeding may not be brought or is
          not maintainable in such courts or that this Agreement may not be enforced in or
          by such courts or that their property is exempt or immune from execution, that
          the suit, action or proceeding is brought in inconvenient forum, or that the
          venue of the suit, action or proceeding is improper. Service of process with
          respect thereto may be made upon Buyer or the Sellers by mailing a copy thereof
          by registered or certified mail, postage prepaid, to such party at its address
          as provided in Section 10.5 hereof. 



             10.14.       
          Third Person Beneficiaries.   This Agreement is not intended
          to confer upon any other Person other than the parties hereto, any rights or
          remedies hereunder. 



             10.15.       
          Representations and Warranties: Disclosure Schedule.  
          Neither the specification of any dollar amount in the representations and
          warranties set forth in Section 3 nor the indemnification provisions of Section
          9 nor the inclusion of any items in the Disclosure Schedule to this Agreement
          will be deemed to constitute an admission by Sellers or Buyer, or otherwise
          imply, that any such amounts or the items so included are material for the
          purposes of this Agreement. All documents or information disclosed in any
          section of the Disclosure Schedule to this Agreement are intended to be
          disclosed for all purposes under this Agreement and will also be deemed to be
          incorporated by reference in each of the other sections of the Disclosure
          Schedule to this Agreement to which they may be relevant. 



             10.16.       
          United States Dollars.   All dollar amounts referred to
          herein will be in lawful currency of the United States of America. 



             10.17.       
          No Agreement until Signed by all Parties.   Nothing in this
          document will constitute an offer capable of acceptance or an agreement of any
          kind until this document is executed and delivered by each of the parties. 



(SIGNATURE PAGE
FOLLOWS) 



53 















	



        IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed
as of the day and year first above written. 











			A.R. SCHMEIDLER & CO., INC.



By:  ARNOLD R. SCHMEIDLER
——————————————

Name:    Arnold R. Schmeidler
Title:      President





			



ARNOLD R. SCHMEIDLER
——————————————

ARNOLD R. SCHMEIDLER 





			



ALBERT J. SCHMEIDLER
——————————————

ALBERT J. SCHMEIDLER 





			HUDSON VALLEY BANK



By:  WILLIAM E. GRIFFIN
——————————————

Name:    William E. Griffin
Title:      Chairman





			HUDSON VALLEY HOLDING CORP.



By:  WILLIAM E. GRIFFIN
——————————————

Name:    William E. Griffin
Title:      Chairman











	




EXHIBIT A 



Power of Attorney 



        I,
Albert J. Schmeidler, residing at _______________________________, having full power to
delegate my authority, do hereby irrevocably mandate, delegate to, appoint and authorize
Arnold R. Schmeidler (the “Stockholders’ Representative”) to act for and in
my name and stead and on my behalf with respect to all of my interests (including,
shareholdings, loans and otherwise) in A.R Schmeidler & Co., Inc. (the
“Company”) and, without limitation, to enter into, execute and sign in my name
and on my behalf any and all agreements, deeds, resolutions, share certificates,
contracts, waivers, instruments and documents and to receive any notices of meeting(s) of
shareholders and represent me and act in my name and on my behalf at any such meeting(s)
which may be necessary or expedient in connection with all aspects relating to my said
interests in the Company. Such power of attorney shall include transfers of my shares in
the Company at such price (and such form of consideration) and to such persons, including
without limitation Hudson Valley Bank any affiliate of Hudson Valley Bank, as the
Stockholders’ Representative may deem necessary, as evidenced conclusively by the
taking of such acts and the execution of any documentation in connection therewith. 



        The
duration of this Power of Attorney shall be for five years from the date hereof (the
“Termination Date”), subject to the last paragraph hereof. 



        I
hereby ratify, confirm, accept and make my own, all actions, executions, votes and
undertakings made on my behalf or in my name with regard to my interests in the Company by
the Stockholders’ Representative. 



        To
the extent necessary or desirable, I hereby agree to ratify and confirm all that the
Stockholders’ Representative may lawfully do or cause to be done in virtue hereof
after the date hereof. 



        I
hereby agree to indemnify the Stockholders’ Representative and any agent employed by
the Stockholders’ Representative for, and hold the same harmless against, any loss,
liability or expense incurred without fraud, bad faith or wilful misconduct on the part of
the Stockholders’ Representative arising out of, or in connection with, the
performance or exercise of the Stockholders’ Representative’s obligations and
rights in connection with this Power of Attorney. 



        I
hereby authorize the Company, its shareholders, officers, directors, counsel and advisers,
and Hudson Valley Bank, to rely on this power of attorney for all purposes. 



        This
Power of Attorney shall be coupled with an interest and shall survive the death of the
undersigned if such death occurs prior to the Termination Date. 



        IN WITNESS WHEREOF,
I have signed as of the ___ day of ________________, 2004 in the City of New York, New York.













			




——————————————


 



	——————————————

Witness



——————————————

Witness		 










	



EXHIBIT B 



        Form
of opinion to be given by counsel for the Sellers and the Company: 



             (a)       
          The Company is duly incorporated and is validly existing as a corporation in
          good standing under the laws of the State of New York, and has the corporate
          power and authority to own, lease and operate the property used in its business
          and to carry on its business as now being conducted. 



             (b)       
          The authorized capital stock of the Company consists of 100,000 shares of Common
          Stock, par value $0.01 per share. All of the Shares have been duly authorized
          and validly issued, and are fully paid and nonassessable. The Sellers are the
          sole record owners of the Shares. Assuming that Buyer has purchased the Shares
          for value in good faith and without notice of any adverse claims, Buyer will
          acquire all of the rights of the Sellers in the Shares, free and clear of any
          adverse claim of which we have Knowledge. 



             (c)       
          The Agreement has been duly executed and delivered by the Company and the
          Sellers and constitutes a valid and binding obligation of the Company and each
          Seller, enforceable against the Company and each Seller in accordance with its
          terms, except as such enforceability may be limited or affected by (i)
          bankruptcy, insolvency, reorganization, moratorium, liquidation, fraudulent
          transfer, fraudulent conveyance and other similar laws (including, without
          limitation, court decisions) now or hereafter in effect and affecting the rights
          and remedies of creditors generally or providing for the relief of debtors, (ii)
          the refusal of a particular court to grant equitable remedies, including,
          without limitation, specific performance and injunctive relief, and (iii)
          general principles of equity (regardless of whether such remedies are sought in
          a proceeding in equity or at law). The Company has corporate power and authority
          to execute, deliver and perform the Agreement, and all required actions of the
          officers, directors and shareholders of the Company authorizing and adopting the
          execution, delivery and performance thereof by the Company have been taken. The
          execution, delivery and performance of the Agreement by the Sellers and the
          Company do not and will not: 



                  (i)       
          contravene any provisions of the Certificate of Incorporation or By-Laws of the
          Company; 



                  (ii)       
          (after notice or lapse of time or both) conflict with, result in a breach of any
          provision of, constitute a default under, result in the modification or
          cancellation of, or give rise to any right of termination in respect of, any
          agreement listed on Schedule I attached hereto; 



                  (iii)       
          violate any law, rule or regulation applicable to the Sellers or to the Company
          or any order, writ, judgment or decree known to us to which the Company or the
          Sellers are subject; or 



                  (iv)       
          require any authorization, consent, order, permit or approval of, or notice to,
          or filing, registration or qualification with, any governmental, administrative
          or judicial authority which has not already been given or obtained or those
          which the Bank or Hudson Valley is required to obtain. 















	




EXHIBIT C 



Arnold R. Schmeidler
Employment Agreement 



        THIS
AGREEMENT, dated as of _______, 2004, is by and between A.R. Schmeidler & Co., Inc., a
New York corporation with offices at 555 Fifth Avenue, New York, New York 10017 (the
“Company”), Arnold R. Schmeidler, an individual residing at __________________
(“Schmeidler”), and Hudson Valley Bank, a New York state-chartered bank located
at 21 Scarsdale Road, Yonkers , New York 10707 (the “Bank”). 



        This
Agreement is entered into in connection with the Acquisition Agreement dated as of June
__, 2004 (the “Acquisition Agreement”) by and among Schmeidler, Albert J.
Schmeidler, the Company, the Bank, and Hudson Valley Holding Corp., a New York corporation
and registered bank holding company of the Bank (“HVB”). As used herein, the
term “Hudson Valley” means HVB, or any direct or indirect subsidiary of HVB,
including, but not limited to, the Company. 



        Schmeidler
currently is, and has been since the Company’s inception, the Company’s
President and Chief Executive Officer. In consideration of Schmeidler’s continued
service as President and Chief Executive Officer and the compensation that will be paid to
Schmeidler by the Company with respect to such employment, Schmeidler and the Company
agree as follows: 



     1)    
          Term of Employment.   This Agreement shall be effective as of
          the date hereof and, subject to earlier termination as specified herein, shall
          continue for a term of 5 years (the “Initial Term”). Thereafter, the
          Agreement shall continue on a month-to-month basis until terminated by
          Schmeidler or the Company. 



     2)    
          Position and Duties.   During the Term of this Agreement, the
          Company shall employ Arnold R. Schmeidler and Arnold R. Schmeidler agrees to
          serve as the President and Chief Executive Officer of the Company. Arnold R.
          Schmeidler shall have such powers and duties as are set forth on Schedule
          A attached hereto; provided, however, that following the
          Closing, any assets owned by the Company shall be managed by Buyer, expressly
          excluding any assets of clients of the Company. In addition, Schmeidler shall
          serve as a member of the Board of Directors of the Company (the
          “Board”) during the Term. During the Term, Schmeidler shall devote all
          of his business time, attention, skill and efforts exclusively to the business
          and affairs of the Company. Notwithstanding the foregoing, Schmeidler may engage
          in charitable, educational, religious, civic and similar types of activities,
          speaking engagements, membership on the board of directors of other
          organizations, and similar activities to the extent that such activities do not
          inhibit the performance of his duties hereunder or conflict in any material way
          with the business of the Company or HVB. 



     3)    
          Compensation.   For all services rendered by Schmeidler in
          any capacity required hereunder during the Term, including, without limitation,
          services as an executive officer or director of the Company or any of its
          subsidiaries, Schmeidler shall be compensated as follows: 



             (a)       
          The Company shall pay Schmeidler a fixed salary at a rate per annum equal to
          $190,000 (“Base Salary”). 















	





             (b)       
          The Company shall provide Schmeidler with the same benefits, other than bonuses
          or incentive compensation, he currently receives from the Company as set forth
          on Schedule B attached hereto (the “Benefits”). The Company
          shall not reduce or change the Benefits unless such reduction or change is (i)
          consented to by Schmeidler or (ii) required by law. 



     4)    
          Termination of Employment.   



             (a)       
          The Company shall have the right, upon delivery of written notice to Schmeidler,
          to terminate Schmeidler’s employment hereunder (i) pursuant to a
          Termination for Cause, (ii) upon Schmeidler’s Permanent Disability, or
          (iii) pursuant to a Without Cause termination. 



             (b)       
          Schmeidler shall have the right, upon delivery of written notice to the Company
          90 days in advance of the proposed termination date, to terminate his employment
          hereunder in his sole discretion. 



             (c)       
          Schmeidler’s employment hereunder shall terminate automatically without
          action by either party hereto upon Schmeidler’s death. 



             (d)       
          A termination “Without Cause” means a termination of Schmeidler’s
          employment by the Company other than due to Permanent Disability or retirement
          and other than a Termination for Cause. 



             (e)       
          “Termination for Cause” means a termination of Schmeidler’s
          employment by the Company because Schmeidler has (i) failed to perform the
          duties assigned to him hereunder or imposed upon him by applicable law, and such
          failure to perform constitutes self-dealing, willful misconduct, gross
          negligence or recklessness, (ii) committed an act of dishonesty materially
          detrimental to the business of the Company in the performance of his duties
          hereunder or engaged in conduct materially detrimental to the business of the
          Company, (iii) been convicted of a felony involving moral turpitude, (iv) failed
          to perform his duties hereunder in any material respect, which breach or failure
          Schmeidler shall fail to remedy within 30 days after written demand from the
          Company, or (v) engaged in any material employment act or practice, including
          but not limited to sexual harassment, forbidden by the Company in its employment
          manual as revised from time to time. 



             (f)       
          “Good Reason” shall mean any of the following actions or events, if
          taken without Schmeidler’s express written consent and taken after at least
          one warning in writing from Schmeidler to the Company and Hudson Valley
          identifying specifically any such matter and offering a reasonable opportunity
          to cure such matter: (i) a reduction by the Company in Schmeidler’s annual
          salary not agreed to by Schmeidler, (ii) moving the office of the Company
          out of Manhattan to any location other than a location that is within 25 miles
          of Grand Central Station and located in Westchester County, New York or is
          located in Fairfield County, Connecticut, (iii) the failure by the Company to
          continue in effect any material benefit plan to which Schmeidler may be
          entitled, or the taking of any action by the Company which would materially and
          adversely affect Schmeidler’s participation in, or materially reduce
          Schmeidler’s benefits under, any such benefit plan, (iv) a material breach
          of this Agreement by the Company, including a material change in
          Schmeidler’s duties and responsibilities set forth on Schedule A, or
          (v) deprive Schmeidler of any material fringe benefits enjoyed by Schmeidler and
          listed on Schedule B attached hereto. 



2 














	





             (g)       
          “Permanent Disability” means permanently disabled so as to qualify for
          full benefits under the Company’s then-existing disability insurance
          policy. If the Company does not maintain any such policy on the date of
          termination, “Permanent Disability” shall mean the inability of
          Schmeidler to work for a period of four full calendar months during any eight
          consecutive calendar months due to illness or injury of a physical or
          mental nature, supported by the completion by Schmeidler’s attending
          physician of a medical certification form outlining the disability and
          treatment. 



     5)    
          Termination Compensation. 



             (a)       
          If Schmeidler resigns without Good Reason prior to the end of the Initial Term,
          Schmeidler shall pay to the Bank on the date of his resignation (the
          “Termination Payment”) a sum equal to: (i) five (5) times the average
          of his annual salary during the Initial Term (the “Average Salary”) if
          he resigns during the first or second year of the Initial Term; (ii) four (4)
          times the Average Salary if he resigns during the third or fourth year of the
          Initial Term; or (iii) three (3) times the Average Salary if he resigns during
          the fifth year of the Initial Term. The Termination Payment shall be paid by
          Schmeidler to the Company in (w) cash, (x) shares of the common stock of HVB
          (measured by the market value of the common stock of HVB as of the effective
          date of the resignation), (y) a combination thereof, or (z) any other form
          acceptable to the Company in its sole discretion. In the event of the Permanent
          Disability or death of Schmeidler, or in the event of a Change in Control (as
          defined in the Acquisition Agreement), no Termination Payment shall be due to
          the Bank. 



             (b)       
          If the Company terminates Schmeidler Without Cause, the Company shall (i) pay to
          Schmeidler an amount equal to the Base Salary that would have been paid to
          Schmeidler for the remainder of the Initial Term, and (ii) continue to provide
          Schmeidler with health, hospital, and life insurance benefits for the remainder
          of the Initial Term. 



             (c)       
          If the Company terminates Schmeidler for Cause, or due to his death or Permanent
          Disability, or Schmeidler resigns for Good Reason, the Company shall have no
          obligations under this Agreement whatsoever to Schmeidler following such an
          event, including the payment of compensation or provision of benefits. 



     6)    
          Non-Competition; Non-Solicitation. 



             (a)       
          Schmeidler acknowledges that he will be aware of and/or servicing (i) client
          accounts already existing at the Company and (ii) client accounts that may be
          purchased from other investment advisory or securities brokerage firms in the
          future. In view of Schmeidler’s knowledge of the clients and accounts and
          other proprietary information relating to the business of the Company and its
          affiliates and which Schmeidler has heretofore obtained and is expected to
          obtain during his employment with the Company, Schmeidler agrees that he shall
          not: 



                  (i)       
          for a period (the “Competition Period”) beginning on the date hereof
          and ending on the date which is two calendar years after the termination of his
          employment with the Company (for any reason whatsoever), directly or indirectly,
          without the prior written consent of Hudson Valley, engage in any Competition in
          any Restricted Territory; provided, however, that Schmeidler may, without
          violating this covenant, own as a passive investment not in excess of 2% of the
          outstanding capital stock of a corporation which engages in Competition if such
          capital stock is a security which is actively traded on an established national
          securities exchange or is listed on NASDAQ; 



3 














	






                  (ii)       
          at any time during the Competition Period, directly or indirectly, without the
          prior written consent of Hudson Valley, for himself or on behalf of any other
          Person, hire or retain any person known by Schmeidler to be employed by Hudson
          Valley at that time or to have been employed by Hudson Valley within the prior
          six months (any such Person, a “Hudson Valley Employee”), or solicit
          or induce or attempt to solicit or induce any Hudson Valley Employee to leave
          his or her employment with Hudson Valley. Notwithstanding the foregoing, Hudson
          Valley shall consider in good faith any request by Schmeidler to waive the
          prohibition against hiring or soliciting Hudson Valley Employees with respect to
          any Hudson Valley Employee whose employment has been terminated by Hudson
          Valley, and such waiver shall not be unreasonably withheld; 



                  (iii)       
          during the Competition Period, directly or indirectly, for himself or on behalf
          of any other Person, solicit, divert, take away or attempt to take away any of
          the customers of Hudson Valley or the business of any such customers or in any
          way interfere with, disrupt or attempt to disrupt any then-existing
          relationships between Hudson Valley and any of its customers with whom they
          shall deal, at any time; provided, however, that Schmeidler may, without
          violating this covenant, subject to the Investment Advisers Act of 1940, as
          amended, and the rules and regulations promulgated thereunder, trade securities
          in his own portfolio and provide investment advice to his family members free of
          charge; or 



                  (iv)       
          during the Competition Period or at any time thereafter (except with respect to
          information which becomes generally known in the industry through no fault of
          Schmeidler, is part of public knowledge or literature or is lawfully received by
          Schmeidler from a third party) use or disclose to any Person whatsoever any
          confidential or proprietary information of Hudson Valley which he may have
          acquired heretofore or may hereafter acquire relating to the businesses of
          Hudson Valley, including but not limited to, information relating to the
          business, accounts, financial dealings, transactions, trade secrets, intangible
          property, customer lists, plans and proposals of the Company or Hudson Valley,
          whether or not marked or otherwise identified as confidential or secret except
          as authorized by Hudson Valley or ordered by a court of competent jurisdiction. 



             (b)       
          In the event (i) there is a Change in Control (as defined in the Acquisition
          Agreement) and (ii) Schmeidler is terminated by the Company Without Cause or
          resigns for Good Reason, the restrictions of Section 4(a)(i) shall immediately
          terminate; provided, however, that all other provisions of this Agreement shall
          remain in full force and effect, including Sections 4(a)(ii) through (iv). 



             (c)       
          In addition to other terms defined in this Agreement, the following terms when
          used in this Section 4 shall have the following meanings: 



4 














	





                  (i)       
          “Competition” means the participation, directly or indirectly, in the
          business of a Broker or Dealer or an Investment Adviser. 



                  (ii)       
          “Directly or indirectly” means as an individual, partner, shareholder,
          director, officer, principal, agent, employee, consultant, adviser, registered
          representative, associated person or in any other relationship or capacity. 



                  (iii)       
          “Broker” means a person engaged in the business of effecting
          transactions in securities for the account of others and includes brokers or
          dealers who are registered with the SEC and those who are not registered. 



                  (iv)       
          “Dealer” means any person who engages either for all or part of his
          time directly or indirectly in the business of offering, buying, selling, or
          otherwise dealing or trading in securities issued by another Person. 



                  (v)       
          “Investment Adviser” means a person who falls within the definition of
          investment adviser under the Investment Advisers Act of 1940, as amended, but
          for this purpose includes banks and broker-dealers otherwise excluded from the
          definition. 



                  (vi)       
          “Restricted Territory” means the United States of America. 



             (d)       
          Injunctive Relief.   Since a breach of the provisions of Section 4 may not
          adequately be compensated by money damages, the Company shall be entitled, in
          addition to any other right and remedy available to it, to an injunction
          restraining such breach or a threatened breach, and in either case no bond or
          other security shall be required in connection therewith, and Schmeidler hereby
          consents to the issuance of such injunction. 



     7)    
          Consultative Duties Regarding Possible Expansion. 



             (a)       
          Hudson Valley shall include Schmeidler in analyzing and evaluating the
          opportunity to acquire another investment adviser or hire a group of individuals
          who register with the SEC as an investment adviser (an “Acquisition”),
          including participation in the due diligence phase of any such acquisition or
          hiring. 



             (b)       
          Prior to an Acquisition, Hudson Valley agrees to thoroughly discuss and address
          the following items with Schmeidler: 



                  (i)       
          the organization structure of the acquired entity (the “New Entity”)
          following the Acquisition as it relates to the Company (e.g., whether the New
          Entity will be separate from the Company or a division of the Company); 



                  (ii)       
          financial treatment of the possible shift of clients from the Company to the New
          Entity, and vice versa; 



                  (iii)       
          the manner by which new business referral efforts may change (e.g. if the New
          Entity is a growth or specialized growth, such as technology, financial,
          biotechnology, etc. manager as opposed to the value orientation style of the
          Company); and 



5 














	






                  (iv)       
          any appropriate personnel adjustments which may be required as a result of the
          Acquisition (e.g., if Schmeidler should run both the Company and the New Entity
          rather than only the day to day operations of the Company). 



     8)    
          Governing Law.   The validity and interpretation of this Agreement shall be
          construed in accordance with and be governed by the laws of the State of New
          York (without reference to its choice of law principles). 



     9)    
          Severability.   Should any provision of this Agreement or part thereof be held
          under any circumstances in any jurisdiction to be invalid or unenforceable for
          any reason, including, without limitation, because of its geographic or business
          scope or duration, such provision shall be construed in such a way as to make it
          valid and enforceable to the maximum extent possible. Any invalidity or
          unenforceability of any provision in this Agreement shall not affect the
          validity or enforceability of any other provision or other part of such
          provision of this Agreement or any other agreement or instruments. 



     10)    
          Successors and Assigns.   This Agreement shall inure to the benefit of and be
          binding upon the successors and assigns of the Company. No purported assignment
          by Schmeidler shall be valid. 



     11)    
          Consent to Jurisdiction.   The Company, Schmeidler, and the Bank hereby submit to
          the exclusive jurisdiction of the courts of the State of New York in respect of
          the interpretation and enforcement of the provisions of this Agreement and any
          related agreement and hereby waive, and agree not to assert, as a defense in any
          action, suit or proceeding for the interpretation or enforcement of this
          Agreement and any related agreement, that they are not subject thereto or that
          such action, suit or proceeding may not be brought or is not maintainable in
          such courts or that this Agreement may not be enforced in or by such courts or
          that their property is exempt or immune from execution, that the suit, action or
          proceeding is brought in inconvenient forum, or that the venue of the suit,
          action or proceeding is improper. Service of process with respect thereto may be
          made upon the Company, the Bank by mailing a copy thereof by registered or
          certified mail, postage prepaid, to such party at its address as provided in the
          first paragraph of this Agreement. 



     12)    
          Costs of Litigation.   In the event that any litigation arises with respect to the
          interpretation and enforcement of the provisions of this Agreement, the
          non-prevailing party shall reimburse the prevailing party for all of its (or
          his) reasonable attorneys’ fees and costs incurred by the prevailing party
          in the litigation. 



     13)    
          Entire Agreement.   This Agreement is intended by the parties as a final
          expression of their agreement and intended to be a complete and exclusive
          statement of the agreement and understanding of the parties hereto in respect of
          the subject matter contained herein. This Agreement supersedes all prior oral
          and written agreements and understandings and all contemporaneous written
          agreements and understandings between the parties with respect to such subject
          matter. This Agreement may not be changed, amended or superceded except in a
          writing signed by Schmeidler and the Bank. 



6 















	





     14)    
          Acknowledgement. SCHMEIDLER SPECIFICALLY ACKNOWLEDGES THAT: SCHMEIDLER HAS READ
          AND UNDERSTANDS ALL OF THE TERMS OF THIS AGREEMENT; IN EXECUTING THIS AGREEMENT,
          SCHMEIDLER DOES NOT RELY ON ANY INDUCEMENTS, AGREEMENTS, PROMISES OR
          REPRESENTATIONS OF COMPANY OR ANY AGENT OF COMPANY OTHER THAN THE TERMS AND
          CONDITIONS SPECIFICALLY SET FORTH IN THIS AGREEMENT; SCHMEIDLER HAS HAD AN
          OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL WITH RESPECT TO THE EXECUTION OF
          THIS AGREEMENT; AND THAT SCHMEIDLER HAS MADE SUCH INVESTIGATION OF THE FACTS
          PERTAINING TO THIS AGREEMENT AND OF ALL THE MATTERS PERTAINING HERETO AS
          SCHMEIDLER DEEMS NECESSARY. 



(signature page
follows) 



7 














	




        IN
WITNESS WHEREOF, the Company and Schmeidler have executed this Agreement as of the day and
year first above written. 











			A.R. SCHMEIDLER & CO., INC.



By:  
——————————————

Name:    
Title:              





			




——————————————

Arnold R. Schmeidler





			HUDSON VALLEY BANK



By:  
——————————————

Name:    
Title:       






	




8 
















	



EXHIBIT D 



Form
of opinion to be given by counsel for Buyer and Hudson Valley: 



             (a)       
          The Bank is duly incorporated and is validly existing as a banking corporation
          in good standing under the laws of the State of New York. Hudson is duly
          incorporated and is validly existing as a corporation in good standing under the
          laws of the State of New York. 



             (b)       
          Each of the Bank and Hudson have the corporate power and authority to execute,
          deliver and perform the Agreement and to consummate the transactions
          contemplated thereby and all required actions of the officers, directors and
          shareholders of each of the Bank and Hudson authorizing and adopting the
          execution, delivery and performance hereof by each of the Bank and Hudson have
          been taken. The Agreement has been duly executed and delivered by each of the
          Bank and Hudson and constitutes a valid and binding obligation of each of the
          Bank and Hudson, enforceable against each of the Bank and Hudson in accordance
          with its terms, except as enforceability may be limited by applicable
          bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting
          creditors’ rights generally or by the principles governing the availability
          of equitable remedies. The execution, delivery and performance of the Agreement
          by each of the Bank and Hudson and the consummation of the transactions
          contemplated thereby do not and will not: 



                  (i)       
          contravene any provisions of the certificate of incorporation or by-laws of
          either the Bank or Hudson; or 



                   (ii)       
          (after notice or lapse of time or both) conflict with, result in a breach of any
          provision of, constitute a default under, result in the modification or
          cancellation of, or give rise to any right of termination in respect of, any
          contract or agreement to which the Bank or Hudson is a party of which we have
          Knowledge; 



                   (iii)       
          violate any law, rules or regulation applicable to either the Bank or Hudson or
          any order, writ, judgment or decree known to us to which either the Bank or
          Hudson is subject; or 



                  (iv)       
          require any authorization, consent, order, permit or approval of, or notice to,
          or filing, registration or qualification with, any governmental, administrative
          or judicial authority which has not already been given or obtained or those
          which the Company is required to obtain. 



             (c)       
          In connection with the sale of any Additional Consideration Shares by the
          Sellers, (i) the holding period under Rule 144(d) under the Securities Act for
          any Additional Consideration Shares will commence on the Closing Date pursuant
          to Rule 144(d)(3)(iii), (ii) provided that the requirements of Rule 144 and
          Section 5.13 of the Agreement shall have been satisfied, the Sellers will be
          entitled to sell any Additional Consideration Shares acquired by them prior to
          the second anniversary of the Closing Date at any time after the first
          anniversary of the Closing Date; and (iii) provided that the requirements of
          Section 5.13 the Agreement shall have been satisfied, the Sellers will have the
          right to sell all of the Additional Consideration Shares without restriction on
          the later of the date of issuance of such Additional Consideration Shares or the
          second anniversary of the Closing Date. 















	




EXHIBIT E 



Arnold R. Schmeidler
Job Description 



General 












	  	The
President and Chief Executive Officer will have such powers and duties as are customary
for a president and chief executive officer of an investment adviser/broker-dealer
corporation, including general and active supervision over and management of the business
and affairs of the Company and over its several officers, agents, and employees, in the
ordinary course of the Company’s business. The President and Chief Executive Officer
will be a member of the Board of Directors and will report directly to the Board and shall
see that all orders and resolutions of the Board are carried into effect. The
Company’s Chief Operating Officer and Chief Financial Officer will report directly to
the President and Chief Executive Officer. The President and Chief Executive Officer will
have the following specific powers and duties: 





	




Research
and Portfolio Management 











	1.	 	Study
primary and secondary research material, including government,
                    International Monetary Fund and various trade publications. 






	2.	 	Research
and macroeconomic analysis – help produce the Company’s
                    outlook. 







		    a)                         Chair
investment meetings.  







		    b)                         Meet
and interact with investment strategists, economists and analysts.  







	3.	 	Manage
investment portfolios. 






	4.	 	Work
with the Company’s investment managers. 






	5.	 	Make
client and prospect presentations. 






	6.	 	Occasionally
travel to the West Coast and other areas to visit the                     Company’s
clients and companies on which the Company is doing research.                     Meet
with company presidents, chairmen, and chief financial officers. 






	7.	 	Attend
industry seminars and company presentations and host company
                    presentations and conference calls at the Company’s office. 






	8.	 	Participate
in conference calls during earnings report season with the other                     firm
investment managers. 






	9.	 	Work
with managers and the trading department on order executions. 











	





Internal Operations 












	1.	 	Ultimate
responsibility for staff, which includes the hiring and firing of all
                    employees, reviewing all trading activity, all correspondence,
compensation                     levels, and periodic staff performance reviews. 






	2.	 	Monitor
all income and expenses and work with the Company’s Treasurer in
                    overseeing operations. 






	3.	 	Participate
in all contract negotiations. 






	4.	 	Participate
in all reviews with regulators. 






	5.	 	Work
with accountants, auditors and attorneys on financial, regulatory and legal
                    compliance matters. 







	



Additional
Supervisory Practices and Procedures 













	1.	 	As
the officer responsible for supervising the activities of all registered
                    representatives and advisory account managers, review and initial all
                    correspondence to clients and prospective clients. 






	2.	 	Review
all new account information and approve account forms in writing. 






	3.	 	As
required, together with the Chief Financial Officer, conduct an annual
                    compliance meeting with all registered representatives and advisory
account                     managers. Because of the Company’s relatively small
size, meet frequently                     to communicate regulatory developments, firm
policies, and similar information                     to the registered representatives
and managers. 






	4.	 	Review
and initial Buy/Sell blotters on a daily basis. Continuously review the
                    status of all client accounts. 






	5.	 	Prior
to the hiring of any registered personnel, contact previous employers to
                    ascertain and confirm the character and reputation of the prospective
employee. 






	



Insider
Trading 











	1.	 	Together
with the Chief Financial Officer, familiarize every officer, director
                    and employee with insider trading concepts. Together with the Chief
Financial                     Officer, address and respond to any questions regarding the
Company’s                     insider trading policies and procedures. 






	2.	 	Together
with the Chief Financial Officer, address and respond to any report by
                    a Company employee that specific information is material and
non-public and to                     any questions whether information is material and
non-public. 





	



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Interaction
with Board 












	1.	 	Day
to day operations of the Company will be controlled by the Chief Executive
                    Officer with regular updates on the operational results and condition
of the                     Company delivered to the Board. Any changes in the strategic
direction of the                     Company will be decided by the Board. 






	2.	 	Promotions
or bonus arrangements for the senior officers of the Company, other
                    than previously established incentive compensation plans, will be
decided by the                     Chief Executive Officer and be subject to Board
approval. The senior officers                     are considered to be the group of
officers receiving material amounts of stock                     options at closing
(Wyman, Kandel, Albert Schmeidler, Andrew Schmeidler, Kahn,                     and
Crupi). 






	3.	 	Financial
commitments of the Company are to be under the Chief Executive                     Officer’s
purview but any commitments extending beyond the Earn-Out time                     period
(e.g., a 10 year lease commitment or other type of long term contract,
                    such as processing or market related) is subject to Board approval. 





	



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